Numerous Canadian banks said Wednesday that they are increasing their prime interest rate by 25 basis points following the Bank of Canada's rate announcement earlier in the day.

The central bank said it was increasing its key rate by a quarter of a percentage point to 0.5 per cent in a bid to help fight inflation which is at its highest level since 1991.

Canada's Big Five banks — RBC, TD Bank, BMO, CIBC, and Scotiabank — all said they would increase their prime rates to 2.70 from 2.45 per cent, effective March 3.

Desjardins Group and Equitable Bank also said they would follow through on the same rate change.

The rise in rates will increase the cost of loans such as variable-rate mortgages that are linked to the benchmark, but won't directly affect fixed-rate mortgages.

The Bank of Canada said it would likely need to raise rates further to reduce inflation, which hit 5.1 per cent in January.

This report by The Canadian Press was first published March 2, 2022.