Bank of Canada raises interest rates by 25 basis points

By Ovunc Kutlu

ISTANBUL (AA) – The Bank of Canada hiked interest rates Wednesday by 25 basis points, as the central bank continues its policy of quantitative tightening.

The target for the overnight rate has been increased to 5%, with the bank rate now at 5.25% and the deposit rate climbing to 5%.

"Global inflation is easing, with lower energy prices and a decline in goods price inflation," the bank said in a statement. "However, robust demand and tight labor markets are causing persistent inflationary pressures in services."

Canada’s economy "has been stronger than expected, with more momentum in demand," it noted, adding that the bank expects consumer spending to slow in response to the cumulative increase in interest rates.

The Bank of Canada last raised interest rates by 25 basis points on June 7.

Inflation in Canada softened to 3.4% in May, falling significantly from 8.1% that was seen last summer.