Citing persistent underlying price pressures, the Bank of Canada on Wednesday announced its decision to raise interest rates by another quarter point.
The Bank of Canada increased its target for the overnight rate to 5.0 percent, with the bank rate at 5.25 percent and the deposit rate at 5.0 percent.
While inflation has eased significant since last summer, the Bank of Canada noted the downward momentum has come more from lower energy prices and less from easing underlying inflation.
"With the large price increases of last year out of the annual data, there will be less near-term downward momentum in CPI inflation," the Bank of Canada said. "Moreover, with three-month rates of core inflation running around 31/2-4% since last September, underlying price pressures appear to be more persistent than anticipated."
The Bank of Canada forecast consumer price inflation to hover around 3 percent for the next year before gradually declining to 2 percent in the middle of 2025.
"This is a slower return to target than was forecast in the January and April projections," the Canadian central bank said. "Governing Council remains concerned that progress towards the 2% target could stall, jeopardizing the return to price stability."
The Bank of Canada reiterated that it remains resolute in its commitment to restoring price stability for Canadians.
