The Bank of Canada has increased the key interest rate for the first time in more than three years, raising it by a quarter point to to 2.5 per cent.
Governor Tiff Macklem says the increase was needed to reduce the risk that rising oil prices could fuel inflation across the board.
Macklem says global oil prices are expected to remain high for an extended period as the Middle East continues.
He says the outlook for inflation has deteriorated since July.
“The growth outlook for Canada has improved modestly despite continued trade action by the United States.”
With the outlook for inflation “substantially higher, and the economy showing resilience, an increase in the policy rate is needed to reduce the risk that elevated energy prices could spill over to become generalized inflation.”
