The Bank of Canada may increase interest rates in order to keep inflation at bay. The Bank of Canada indicated that both economic growth and inflation in Canada were stronger than expected. Core inflation reached a high of 2.5% in April, and the Canadian economy was probably a percentage point higher than projected for Q1.
“On balance, the Bank judges that there is an increased risk that future inflation will persist above the 2% inflation target and that some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target,” the Bank said in its statement.
J.P. Morgan Securities Canada chief economist Ted Carmichael expects the bank will raise interest rates in July and September, which will bring the main rate to 5.25% by the end of Q1 in 2008.
The Bank of Canada will release more details in July.
To comment on this story email brooke.smith@rci.rogers.com.