Bank of Canada hikes key interest rate by full percentage point

OTTAWA – The Bank of Canada raised its key interest rate by a full percentage point on Wednesday, marking the largest single hike since August 1998.

The central bank’s decision puts the new rate at 2.5 per cent and signals a more aggressive approach to reining in skyrocketing inflation, which reached a 39-year-high of 7.7 per cent in May.

Most economists had forecasted a rate hike of three-quarters of a percentage point.

In its latest monetary policy report, the Bank of Canada said inflation in Canada is “largely the result of international factors,” but that “domestic demand pressures are becoming more prominent.”