TORONTO, Canada – CANADA’S central bank held its key interest rate at a record-low 0.25 per cent yesterday and reaffirmed that it expects it will keep the rate there until July, but signalled it is getting closer to raising rates.

The Bank of Canada said yesterday the five per cent economic growth Canada saw in the fourth quarter was slightly higher than expected. It said growth has been “spurred by vigorous domestic spending and further recovery in exports” and cited low rates, increased confidence and global growth as reasons.

The bank said the persistent strength of the Canadian dollar and weak US demand continue to act as significant drags on economic activity in Canada. About 80 per cent of Canada’s exports go to the United States. A higher Canadian dollar hurts exports.

But the bank said the risks to their inflation are now “roughly balanced”. Previous statements have said the risks were lower.

Some of Canada’s top economists took that to mean rates will go up once the conditional commitment ends in July. The Canadian dollar strengthened almost a cent, to 96.80 US cents after yesterday’s statement was released.

Avery Shenfeld, senior economist at CIBC World Markets, said the bank has taken the first steps to set up for a rate hike in July by tilting the inflation risks back to neutral and by giving some upside to the current pace of inflation.

Shenfeld said he expects rates to rise as “as soon as the commitment to keep on them hold until the end of June has passed”.