Bank of Canada raises interest rates another half point to 1.5% | Photo credits: © Bank of Canada
OTTAWA, June 1 (Reuters) – The Bank of Canada on Wednesday raised its key rate from 1.0% to 1.5%, the second consecutive hike of 50 basis points, and said it was ready “to act more force if necessary to honor its commitment to reach the inflation target of 2%”.
In its monetary policy statement, the central bank points out that the Canadian economy is in a situation of excess demand and estimates that inflation should rise further in the short term before starting to decline.
“The risk of high inflation becoming entrenched has increased. The Bank will use its monetary policy tools to bring inflation back to target and keep inflation expectations well anchored,” she said.
“The Board of Directors judges that interest rates will have to rise further,” added the central bank, which decided for the first time since November 2000 to raise its rates consecutively by half a point after the rise in 50 basis points last April.
Inflation in Canada hit 6.8% in April, the highest in 30 years. (Report Julie Gordon; French version Claude Chendjou, edited by Jean-Michel Bélot)