Ottawa - The Bank of Canada is preparing this morning to raise the interest rate after indicating this step a few weeks ago when it said it would not keep the rate at emergency levels.

It has been two years this week since the Bank of Canada lowered its key policy rate in response to overcoming any economic repercussions caused by the novel coronavirus.

What followed were two additional interest rate cuts in March 2020, resulting in its main policy changing with an interest rate raised to 0.25 percent, where it has remained since then.

The central bank recently indicated better-than-expected economic growth by the end of 2021, a booming housing market, and inflation rates at their highest levels in three decades, signaling that the time has come to raise interest rates from emergency levels.

Douglas Porter, Chief Economist at BMO Bank, says he expects the central bank to raise the interest rate by a quarter percentage point to 0.5 percent.

He says the first interest rate hike may have the greatest impact on how households manage their debts, but the central bank will have to raise interest rates by a full percentage point before there is an impact on the country's housing market.

He added, "We will need to see a series of interest rate hikes from the Bank of Canada before it starts to seriously affect the economy."

It is noteworthy that generally it takes less than six months or up to 18 months for a rate hike to have an effect on headline inflation.

The annual inflation rate rose to 5.1 percent in January and is expected to increase with rising global oil prices.

Editor: Dima Abu Khair