Bank of Canada hikes rates by 25 basis points

The move was in line with economists' expectations.

"Global inflation is easing, with lower energy prices and a decline in goods price inflation," the Bank said.

“However, robust demand and tight labour markets are causing persistent inflationary pressures in services. Economic growth has been stronger than expected, especially in the United States, where consumer and business spending has been surprisingly resilient. After a surge in early 2023, China’s economic growth is softening, with slowing exports and ongoing weakness in its property sector.

"Growth in the euro area is effectively stalled: while the service sector continues to grow, manufacturing is contracting. Global financial conditions have tightened, with bond yields up in North America and Europe as major central banks signal further interest rate increases may be needed to combat inflation."

The BoC said consumer price inflation is expected to hover around 3% for the next year, before gradually falling to 2% in the middle of 2025. This is a slower return to target than was forecast in the January and April projections.