OTTAWA, June 7 Reuters The Bank of Canada on Wednesday hiked its overnight rate to a 22year high of 4.75, and markets and analysts immediately forecast yet another increase next month to ratchet down an overheating economy and stubbornly high inflation.

The central bank had been on hold since January to assess the impact of previous hikes after raising borrowing costs eight times since March 2022 to a 15year high of 4.50 the fastest tightening cycle in the bank39;s history.

Surprisingly strong consumer spending, a rebound in demand for services, a pickup in housing activity and a tight labor market show excess demand is more persistent than anticipated, the central bank said in a statement.

Noting an uptick in inflation in April and the fact that threemonth measures of core inflation remained high, the Bank of Canada BoC said that concerns have increased that CPI inflation could get stuck materially above the 2 target.

Given this backdrop, the governing council determined that monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the 2 target.

The Canadian dollar was trading 0.4 higher at 1.3350 to the greenback, or 74.91 U.S. cents, after touching its strongest level in four weeks at 1.3322. Money markets see a 60 chance of another rate hike in July and have fully priced in further tightening by September.

We expect another 25 basis points coming in July, said Derek Holt, vice president…