The Bank of Canada has raised its key lending rate by half a percentage point to 3.75 per cent.
The central bank cites high inflation for its sixth rate increase since March.
In a statement Wednesday morning, the Bank of Canada said high inflation is the result of the strength of the global recovery from the pandemic, a series of global supply disruptions, and elevated commodity prices, particularly for energy which are driven by Russia's invasion of Ukraine.
The bank said there continues to be more demand for goods and services than the Canadian economy can supply, putting upward pressure on prices.
It said businesses are still grappling with a shortage of workers and that is leading to a rise in the price for services.
The bank maintains that the rate hikes are needed because core inflation is still not yet showing any meaningful drop and expectations for inflation remain high, increasing the risk elevated inflation becomes entrenched.
The bank said it expects the Consumer Price Index to ease as higher interest rates rebalance supply and demand, falling to 3 per cent by the end of 2023 and returning to the 2 per cent target by the end of 2024.
TD Canada Trust, CIBC, and Scotiabank all announced Wednesday afternoon they were also raising rates, to 5.95 per cent each.
