The Bank of Canada raised its benchmark interest rate this week by 25 basis points to 4.5 per cent, the highest it’s been since 2007. The move was widely expected by economists as the bank tries to wrestle record-high inflation. It’s the eighth time in less than a year that the bank has hiked its trendsetting rate — a move that will make borrowing money more expensive.

But at one quarter of a percentage point, it’s also the smallest hike since March, and thus a sign that the bank may be done with hiking rates for the next little while. The bank said as much at a news conference following the announcement, with governor Tiff Macklem using the word “pause” to describe the bank’s monetary policy strategy at this moment.

“With today’s modest increase, we expect to pause rate hikes while we assess the impacts of the substantial monetary policy tightening already undertaken,” he said. “To be clear, this is a conditional pause — it is conditional on economic developments evolving broadly in line with our ... outlook. “If we need to do more to get inflation to the two-per-cent target, we will.”

All five of Canada’s biggest lenders moved swiftly to raise their own prime lending rates in response, adding the same 0.25 percentage point adjustment, to bring their rates to 6.7 per cent, starting Thursday. The exact impact will depend on the loan, but in general, Wednesday’s hike will add about $15 to a variable rate mortgage payment every month, for every $100,000 worth of debt. That’s coming on the heels of the seven previous hikes.

The hikes so far have managed to bring inflation down from about four times the normal level to only about three times, but the central bank says it’s confident that the rate will come down sooner than many are anticipating. According to the latest projections in the Monetary Policy Report, also released Wednesday, the Bank of Canada expects the headline inflation number to come down to as low as three per cent by the end of this year, and then two per cent next year.

What a 25-point increase means for you - According to Ratehub.ca a homeowner who put a 10% down payment on a $626,318 home with a five-year variable rate of 5.3% amortized over 25 years (total mortgage amount of $581,160) has a monthly mortgage payment of $3,480. With the 25-basis point rate increase this homeowner’s variable mortgage rate will increase to 5.55% and their monthly payment will increase to $3,564. This will result in the homeowner paying $84 more per month — or $1,008 per year — on their mortgage payments.