READ: Full text of Bank of Canada's latest interest rate decision - BNN Bloomberg

To get inflation down to 2% you have to cause pain: Lyle SteinThe Bank of Canada raised its key interest rate target by a quarter of a percentage point to 4.75 per cent on Wednesday.The Bank of Canada today increased its target for the overnight rate to 4.75 per cent, with the Bank Rate at five per cent and the deposit rate at 4.75 per cent. The Bank is also continuing its policy of quantitative tightening.

Globally, consumer price inflation is coming down, largely reflecting lower energy prices compared to a year ago, but underlying inflation remains stubbornly high. While economic growth around the world is softening in the face of higher interest rates, major central banks are signalling that interest rates may have to rise further to restore price stability.

Canada's economy was stronger than expected in the first quarter of 2023, with GDP growth of 3.1 per cent. Consumption growth was surprisingly strong and broad-based, even after accounting for the boost from population gains. Demand for services continued to rebound. In addition, spending on interest-sensitive goods increased and, more recently, housing market activity has picked up.

CPI inflation ticked up in April to 4.4 per cent, the first increase in 10 months, with prices for a broad range of goods and services coming in higher than expected. Goods price inflation increased, despite lower energy costs. Services price inflation remained elevated, reflecting strong demand and a tight labour market.

Based on the accumulation of evidence, Governing Council decided to increase the policy interest rate, reflecting our view that monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the two per cent target. Quantitative tightening is complementing the restrictive stance of monetary policy and normalizing the Bank's balance sheet.

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