The Bank of Canada on Wednesday hiked its overnight rate to a 22-year high of 4.75%, and markets and analysts immediately forecast yet another increase next month to ratchet down an overheating economy and stubbornly high inflation.
The central bank had been on hold since January to assess the impact of previous hikes after raising borrowing costs eight times since March 2022 to a 15-year high of 4.50% - the fastest tightening cycle in the bank's history.
Noting an uptick in inflation in April and the fact that three-month measures of core inflation remained stubbornly high, the Bank of Canada said, "Concerns have increased that CPI inflation could get stuck materially above the 2% target." The Canadian dollar was trading 0.4% higher at 1.3350 to the greenback, or 74.91 U.S. cents, after touching its strongest level in four weeks at 1.3322. Money markets see more than a 60% chance of another rate hike in July and have fully priced in further tightening by September.
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