OTTAWA, June 1 (Xinhua) -- The Bank of Canada announced Wednesday it increased its benchmark interest rate by 50 basis points to 1.5 percent and is also continuing its policy of quantitative tightening (QT).

       The central bank said in a press release that the consumer price index in Canada reached 6.8 percent for the month of April, which is well above its forecast and will likely move even higher in the near term before beginning to ease.

       Canadian economic activity is strong and the economy is clearly operating in excess demand. National accounts data for the first quarter of 2022 showed GDP growth of 3.1 percent. Job vacancies are elevated, companies are reporting widespread labour shortages, and wage growth has been picking up and broadening across sectors. Housing market activity is moderating from exceptionally high levels. With consumer spending in Canada remaining robust and exports anticipated to strengthen, growth in the second quarter is expected to be solid, according to the press release.

       With the economy in excess demand, and inflation persisting well above target and expected to move higher in the near term, the Governing Council continued to judge that interest rates will need to rise further, the bank explained.

       The policy interest rate remains the central bank's primary monetary policy instrument, with quantitative tightening acting as a complementary tool. The pace of further increases in the policy rate will be guided by the ongoing assessment of the economy and inflation, and the Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the 2 percent inflation target, the Bank of Canada said.