OTTAWA (CP) The Bank of Canada raised interest rates Tuesday and warned of still higher rates to come. As it lifted its key overnight rate by a quarter-point to 2.50 per cent, the central bank said strong economic growth means it will have to raise rates even more. Analysts say that means as many as four more interest rate hikes likely lie ahead, although opinion is divided over just how much the rate might rise. Tuesdays increase in borrowing costs which big chartered banks quickly matched by raising their prime rate to 4.25 per cent was expected by the markets. That meant the dollar, which shrugged off political turmoil over the ouster of Paul Martin as finance minister Sunday, showed little reaction to the widening spread between Canadian and U.S. rates. The loonie opened Tuesday at 65.53 cents US, up 0.06 of a cent from its close Monday. However, by the end of the day it had slipped 0.16 cents to close at 65.31 US. Markets werent really surprised by todays move, said Warren Lovely, senior economist with CIBC World Markets. Really, what youre seeing is a currency that hasnt really been shocked by too much when you consider it ended the day (Monday) without really any lasting damage from the finance minister changeover. With a surprisingly strong six per cent growth rate in the first quarter, when measured on an annualized basis, interest rates must continue to climb to head off inflation, the central bank warned in a statement. In contrast, sluggish U.S. growth means the Federal Reserve wont likely boost its record-low rate of 1.75 per cent until late this year. With our largest trading partner in the doldrums, the Bank of Canada wont likely want to raise rates any quicker than quarter-point increments at each of its next four rate-setting announcement dates, said Lovely. But with several clear signs of strong growth at home raising the risk of runaway inflation the bank will want to take its foot off the accelerator faster than that, argued Marc Levesque, senior economist with Toronto Dominion Bank. The banks key concern is holding down inflation. The core rate, which excludes volatile food and energy costs and is most closely watched by policy makers, was 2.2 per cent in April.