Bank of Canada holds interest rate 5%, warns of more tightening

FILE PHOTO: A sign is pictured outside the Bank of Canada building in Ottawa

TORONTO (Reuters) - The Bank of Canada on Wednesday held its key overnight interest rate at 5%, noting the economy had entered a period of weaker growth, but said it could raise borrowing costs again should inflationary pressures persist.



"I think the Bank of Canada saw the same thing we all saw with the latest numbers and particularly the consumer really starting to feel the effect of interest rates. I think the language is still crafted in a way to suggest that they're really not close to cutting interest rates and that balance of risk is still to the upside to get surprised again. But at the same time they recognize that inflation is likely to perk up in the near term and they remain probably dissatisfied with how inflation has been evolving."

"I think they really want to avoid another run up in real estate and consumption as we saw in Q1, so that's why the remain as hawkish, but I don't think they will actually execute on that threat."

(Reporting by Ismail Shakil; Editing by Denny Thomas)