OTTAWA, Jan 25 (Reuters) – The Bank of Canada raised its benchmark overnight interest rate by 10 basis points to 4.5% on Wednesday, at 10 the highest level in years and said it may pause to gauge the cumulative effect of previous gains.
The move was in line with expectations in a Reuters survey of economists. The central bank raised interest rates at a record pace of 25 basis points in 10 months to curb inflation, which hit 8.1 last summer growth of 6.3 percent in December, still more than three times the bank’s 2 percent target. In its quarterly monetary policy report, it includes new forecasts. Inflation will drop to around 3% around the middle of this year and hit target next year. A statement said it was keeping the policy rate at current levels while assessing the impact of cumulative rate hikes.
“Governor is prepared to raise policy rates further to meet inflation target of 2% if recovery is required.”