Bank of Canada hikes interest rate to 4.75%, highest in 22 years

The Bank of Canada raised its benchmark interest rate on Wednesday amid fears that a hot economy could mean inflation gets stuck “materially” above its two per cent target.

While most economists were not expecting the move, some now say one hike won’t be enough and additional increases might be coming later this summer.

The central bank raised its benchmark interest rate to 4.75 per cent on Wednesday, an increase of a quarter-percentage point in its first hike since January. The policy rate, which sets the cost of borrowing in Canada, now stands at its highest level since May 2001.

The Bank said in a statement accompanying the decision that policymakers felt the previous rate of 4.5 per cent was “not sufficiently restrictive” to bring inflation back down to its two per cent target.

The return to rate hikes comes after two consecutive decisions in March and April when the Bank left its key rate unchanged.

Global's Kyle Benning reports.

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