Bank of Canada unveils 75-basis point hike and says rates will need to go higher still

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

By Julie Gordon

OTTAWA, Sept 7 (Reuters) - The Bank of Canada hiked interest rates by 75-basis points to a 14-year high on Wednesday, as expected, and said the policy rate would need to go higher still given the fight against raging inflation.

The central bank, in a regular rate decision, increased its policy rate to 3.25% from 2.5%, matching analyst forecasts to hit a level not seen since April 2008. The decision lifted rates above the neutral range for the first time in about two decades.

"Given the outlook for inflation, the Governing Council still judges the policy interest rate will need to rise further," the bank said after an unprecedented fourth consecutive outsize rate increase.

The central bank said while headline inflation fell to 7.6% in July from 8.1%, that was due to gasoline prices, with the core measures continuing to move higher. Prices in Canada are increasing at rates not seen since the early 1980s.

Governor Tiff Macklem had said rates would likely need to go above the neutral rate, the range from 2% to 3% where monetary policy neither stimulates nor weighs on the economy.

(Reporting by Julie Gordon, editing by David Ljunggren)

((Reuters Ottawa bureau; +1 647 480 7921, david.ljunggren@tr.com))

(Reporting by Julie Gordon, editing by David Ljunggren)