Bank of Canada hikes interest rate to 4.75 per cent

The central bank also pointed to housing sales and prices heating up as more homebuyers came off the sidelines in Canada’s major housing markets during the spring.

The consumer price index, the country’s main gauge on prices for goods like groceries and fuel, resurged to an annualized pace of, up from the 4.3 per cent pace recorded a month earlier and surpassing economist expectations of 4.1 per cent. It was the wrong direction for the central bank and a far cry from its two per cent target. The governing council was concerned that inflation could get stuck above that target.

“Monetary policymakers will be watching the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour in deciding whether rates need to move even higher,” Mendes said in a note following the announcement.

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