OTTAWA — The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 3 per cent. The operating band for the overnight rate is correspondingly increased, and the Bank Rate is now 3 1/4 per cent.

Consumer price data since the Bank's last interest rate announcement on 21 January indicate that both core and total CPI inflation remain well above the Bank's 2 per cent inflation target. Persistent above-target inflation rates over the past few months reflect not only the impact of higher-than-expected crude oil and natural gas prices, but also continuing increases in auto insurance premiums and price pressures in certain sectors such as housing, food, and some services. More broadly, as noted in the January 2003 Monetary Policy Report Update, the fact that relative price increases are having a large impact on measures of trend inflation reflects an underlying firmness in the price-setting environment.