June 7 2023: The Bank of Canada hiked its key interest rate 25 basis points on Wednesday, ending its three-month pause on increases, as the Canadian economy runs hotter than expected.
The increase brings the central bank’s target for the overnight rate to 4.75 per cent, the highest level since May 2001.
The central bank came off the sidelines on Wednesday after several indicators showed unexpected resilience in the Canadian economy in recent weeks.
“Overall, excess demand in the economy looks to be more persistent than anticipated,” the central bank said in a statement alongside its interest rate decision.
“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.”