Originally created 09/09/04

Bank of Canada increases key interest rate

OTTAWA -- The Bank of Canada boosted its key interest rate Wednesday by a quarter percentage point and hinted that there could be more increases.

The central bank raised its key overnight interest rate to 2.25 per cent, a move widely expected by financial markets.

It will likely be quickly matched by the major chartered banks, which are expected to correspondingly adjust their variable rate mortgages and the prime rate charged by the big banks to their best customers.

Other consumer borrowing costs will likely also be indirectly influenced to shift upwards, following the Bank of Canada's trend.

In a statement, central bankers warned that Canada's growing economy is pushing up inflation and that will likely lead to higher interest rates down the road.

"Economic growth in the first half of this year was somewhat stronger than the bank had been expecting," largely due to strong demand for Canadian exports, central bankers noted.

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