Bank of Canada hikes key interest rate by full percentage point

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

The central bank’s decision signalled a more aggressive approach to bringing skyrocketing inflation, which hit a 39-year-high of 7.7 per cent in May, back down to its target of two per cent.

Bank of Canada governor Tiff Macklem said the "Inflation is too high, and more people are getting more worried that high inflation is here to stay. We cannot let that happen."

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.”

The rate hike Wednesday brings the Bank of Canada's target for the overnight rate to 2.5 per cent and is expected to prompt the commercial banks to raise their prime rates which will increase the cost of loans linked to the benchmark such as variable rate mortgages and home equity lines of credit.