Bank of Canada raises key interest rate, says another hike possible – BNN Bloomberg

Bank of Canada raises key interest rate, says another hike possible  BNN Bloomberg

OTTAWA — The Bank of Canada on Wednesday hiked its key policy rate for the first time in more than three years and said further increases might be needed to prevent soaring energy costs from fuelling broader inflation. The bank lifted the rate by 25 basis points to 2.5 per cent, as widely expected, and also ramped up its inflation forecast for 2027 to 3.1 per cent from the 2.0 per cent it had predicted in July. Growth this year is set to be 1.0 per cent, higher than the 0.7 per cent seen in July. “With the outlook for inflation substantially higher and the economy showing resilience, an increase in the policy rate is needed to reduce the risk that elevated energy prices could spill over and become generalized inflation,” Governor Tiff Macklem said in opening remarks to reporters.

“There could be a need to increase the policy rate further, but given uncertainties, we will proceed carefully.” The annual inflation rate hit 3.2 per cent in September, above the bank’s one-three per cent target range, almost solely led by higher energy and energy-related costs of transportation. Macklem said inflation was expected to end the year at 3.5 per cent and stay around three per cent for most of next year before returning close to the two per cent target