OTTAWA, July 10: The Bank of Canada on Tuesday hiked its key lending rate by 0.25 percentage points to 4.50 per cent, hoping to quell mounting inflationary pressures with its first rate increase in a year.

And another rate increase is likely in the coming months as the central bank moves to cool an economy that has been heating up more than expected, it said.

“Economic growth and inflation in Canada in the first half of this year have been stronger than expected,” the central bank said in a statement.

As well, it said “the economy is now operating further above its production potential than was projected” while inflation has been “higher than projected,” and above its 2.0 per cent target.

Against this backdrop, the Canadian dollar has “appreciated sharply,” surging to a 30-year high and nearing parity with the US greenback, the bank noted.

But despite an estimated 197,000 new jobs created this year, Canada’s unemployment rate has remained steady at 6.1 per cent as thousands of people entered the labour force in search of work, Statistics Canada said last week.—AFP