Julie Gordon, David Ljunggren

OTTAWA (Reuters), – Wednesday saw the Bank of Canada raise interest rates, its first since October 2018, and stated rates must rise despite greater uncertainty due to Russia’s invasion of Ukraine.

As expected, the central bank increased rates 25 basis points, to 0.50%. It also stated that it will continue with its bond-buying program’s reinvestment phase. The rate of interest had dropped to 0.2% in March 2020 from a record high.

In its rate determination statement, the bank stated that Russia’s unprovoked invasion in Ukraine was a significant new source of uncertainty. Prices for oil and commodities have increased sharply. Inflation will increase around the globe as a result.

They also noted that disruptions in supply could impact global growth but the overall situation was fluid.

According to the bank, Ukraine’s situation is increasing pressure on already high inflation. It also stated that it expects prices to rise faster than its January forecast.

According to the report, “Price rises have been more prevalent and all measures of core inflation are rising.” “Persistently rising inflation increases the likelihood that inflation expectations for longer periods could drift upwards,” it said.

The Bank of Canada has a 1%-to-3% control range. Inflation rose to an all-time high of 5.1% in January for the 10th straight month.

According to the Bank of Canada, Canada’s recovery from Omicron was also “well in train” and first quarter growth looks more solid than originally projected.

According to the bank, “As inflation pressures rise and the economy continues its expansion, we expect interest rates to need to go up further.”