Canada raises interest rates by 50 basis points

The Bank of Canada hiked interest rates Wednesday by 50 basis points, in line with expectations, and it continued its monetary policy of quantitative tightening.

The target for the overnight rate has been increased to 4.25%, with the bank rate now at 4.5% and the deposit rate climbing to 4.25%.

"Inflation around the world remains high and broadly based. Global economic growth is slowing, although it is proving more resilient than was expected at the time of the October Monetary Policy Report," the bank said in a statement.

It said GDP growth in Canada was stronger than expected in the third quarter with the economy continuing to operate in excess demand, while the labor market remains tight and unemployment is near historic lows.

The bank raised interest rates by 100 basis points July 13 -- its steepest hike since August 1998.

Annual consumer inflation in Canada eased to 6.9% in October, after peaking at 8.1% in June.

The central bank said, however, that inflation is "still too high and short-term inflation expectations remain elevated," adding: "The longer that consumers and businesses expect inflation to be above the target, the greater the risk that elevated inflation becomes entrenched."

The bank noted that its governing council continues to assess how tighter monetary policy is working to slow demand, how supply challenges are resolving and how inflation and inflation expectations are responding.