The Canadian dollar was little changed in the middle of the trading week after the Bank of Canada followed through on an interest rate hike to combat inflation.

Policymakers raised the benchmark rate by a quarter point to 2.5%, coming in line with economists’ expectations.

It was a difficult decision for officials as they wrestled with elevated headline inflation and weaker economic conditions.

September’s annual inflation surged to 3.1%. Underlying inflation is a lot tamer, however, with the 12-month core rate at 2.2%. Trimmed-mean inflation is also below 2%, far below the central bank’s target.

Meanwhile, the Canadian labor market has weakened significantly. The economy lost more than 68,000 jobs in September, and the unemployment rate climbed to 6.5%.

But Bank of Canada Governor Tiff Macklem says it was the right decision to raise interest rates.

“Any time you’re changing direction, it’s always a difficult decision,” he stated. “There was a clear consensus that, looking at this from a few angles, it made sense to raise the policy rate today.”

Echoing his central bank counterparts, Macklem said he and his colleagues will take one meeting at a time.

“We don’t want to increase our policy rate and restrain growth if inflation is well contained. But we also don’t want to be too slow to respond,” he added.

“In the last several months, the balance of risks around that has shifted. Inflation is looking less likely to be well contained, and it’s looking more likely to be more persistent,” Macklen told reporters. “And I think when you look at it through that risk lens, that also tilted in favor of raising the policy rate now.”

Yields on Canadian government bonds escalated midweek, with the benchmark ten-year rising three basis points to 3.86%.

The USD/CAD currency pair dipped 0.1% to 1.4039, from an opening of 1.4051, at 15:36 GMT on Thursday. The EUR/CAD was flat at 1.5631.