The Bank of Canada has hiked its rate to 2.5 per cent which is the biggest jump since 1998.

The BOC says inflation in Canada is higher and more persistent than expected in its April Monetary Policy Report, and will likely remain around 8 per cent in the next few months

The central bank cites global inflation is higher, reflecting the impact of the Russian invasion of Ukraine, ongoing supply constraints, and strong demand. It says many central banks are tightening monetary policy to combat inflation, and the resulting tighter financial conditions are moderating economic growth.

The BOC points to labour markets which are tight with a record low unemployment rate, widespread labour shortages, and increasing wage pressures. With strong demand, businesses are passing on higher input and labour costs by raising prices.

The Bank expects Canada’s economy to grow by 3½ per cent in 2022, 1¾ per cent in 2023, and 2½ per cent in 2024.