The Bank of Canada on Wednesday announced its widely expected decision to raise interest rates by another half a percentage point, saying inflation remains “too high.”
The Canadian central bank increased its target for the overnight rate by 50 basis points to 4.25 percent, marking the seventh consecutive rate hike.
However, comments in the accompanying statement seemed to suggest the Bank of Canada is nearing the end of its tightening cycle.
“Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target,” the Bank of Canada.
The Bank of Canada’s decision to continue raising interest rates comes as inflation remains well above the bank’s 2 percent target, although it noted the three-month rates of change in core inflation have come down.
“Inflation is still too high and short-term inflation expectations remain elevated,” the bank said. “The longer that consumers and businesses expect inflation to be above the target, the greater the risk that elevated inflation becomes entrenched.”
The Bank of Canada said it is also continuing its policy of quantitative tightening, which it said is complementing increases in the policy rate.
“We are resolute in our commitment to achieving the 2% inflation target and restoring price stability for Canadians,” the bank concluded.