The Bank of Canada today raised its key interest rate 25 basis points to 2.50% from 2.25% — meeting analysts expectations.

The central bank said that more rate hikes are in the pipeline, but wasn’t more specific on exactly when they would happen.

“Further reduction of monetary stimulus will be required over time to keep inflation on target, with the pace depending on the bank’s continuing assessment of the prospects for factors that affect pressures on capacity and, hence, inflation,” the bank said in a statement.

The Bank of Canada said the economy is operating near its production capacity and noted that world oil prices are now “well above the bank’s earlier assumptions.”

It also noted that the dollar has appreciated.

The bank said higher oil prices and a higher Canadian dollar will hold the Canadian economy to growth of “slightly less” than 3% in 2005. That’s a drop from its earlier forecast of 3.5% growth.

The Bank projects 2006 growth of “slightly more” than 3%. The bank projects core inflation will rise to its 2% target by the end of next year, while total inflation will move “well above” core inflation in the first half of 2005 because of soaring oil prices.

The central bank previously raised rates by a quarter percentage point in early September.

The next scheduled interest rate announcement comes on December 7. Many economists expect the bank to hike rates again at that time.

“The comments accompanying today’s announcement are consistent with our view that the Bank will hike again by 25 basis points [a quarter of a percentage point] on December 7th and will likely lift the overnight rate towards 4% next year,” TD Bank senior economist Craig Alexander said in a commentary.

BMO Nesbitt Burns chief economist Sherry Cooper wasn’t so sure. “Today’s rate hike was no surprise, but the commentary is on the dovish side, especially the downgrade to 2005 growth,” she said.