The Bank of Canada has raised its key interest rate by a quarter percentage point to 4.75 per cent Wednesday morning.

This is the highest it has been since April 2001.

The decision to raise interest rates comes after the central bank announced a pause earlier in January.

“Based on the accumulation of evidence, governing council decided to increase the policy interest rate, reflecting our view that monetary policy was not sufficiently restrictive to bring supply and demand into balance and return inflation sustainably to the two per cent target,” the Bank of Canada said in a news release.

READ MORE: Bank of Canada holds interest rate steady at 4.5%

It says excess demand in the economy appears to be more persistent than it had anticipated, pointing to a tight labour market, better-than-expected economic growth in the first quarter and “surprisingly strong” consumption growth.

The central bank says it will continue to monitor the economy and evolution of inflation, getting rid of any language it was pausing rate hikes, which has appeared in the text of rate announcements since January.

READ MORE: Bank of Canada raises key interest rate by a quarter point to 4.5%

In January, the Bank of Canada announced it would pause its rate-hiking pattern that started in March 2022.

It says it still expects inflation to drop to about three per cent this summer, but with core inflation still elevated its concerns about inflation staying above two per cent have increased.

With files from The Canadian Press.