The Bank of Canada on Tuesday raised its key policy interest rate by a quarter of a point to 3.5 percent in an effort to head off inflation.

The move, the fourth rise since September, was widely expected by financial markets which still anticipate further, more modest rate hikes in the coming months.

The central bank said in a statement it believes the economy is growing at full capacity and warned if it is not cooled down by increasing interest rates, inflation could catch fire.

It said consumer inflation, at 2.3 percent in the fourth quarter, "was lower than expected" while core inflation remained stable at 1.6 percent.

The increase came only hours after Canadians elected a Conservative minority government to be led by Stephen Harper, but the bank's action was not related to the federal vote.

Source: Xinhua