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The Bank of Canada acknowledged Canada's economic recovery by raising its trend-setting interest rate to 0.75 per cent, but warned of a weak global economic picture.

While saying that consumer and government spending continue to drive the Canadian recovery, Bank Governor Mark Carney admitted that the rebound from the recession will unfold more slowly than the central bank had been predicting.

Facing an "uneven global recovery," Carney signaled that the Bank will have to see improvements in the economic situation before it raises interest rates in Canada again.

"Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments," Carney said in a statement accompanying the rate announcement.

The hike continues the Bank's movement away from the rock-bottom interest-rate policy Carney adopted during the depth of the recession. After keeping the rate at 0.25 per cent for nearly a year to bolster the struggling economy, the Bank raised its overnight rate to 0.50 per cent on June 1.

But while the Canadian economy showed strong growth in the first months of this year, the current outlook is decidedly mixed, according to the central bank.

"The global economic recovery is proceeding but is not yet self-sustaining," Carney said.

In the U.S., private demand is picking up but remains uneven, and the European debt crisis, while staunched by government action, remains a question mark for the rest of the world.

"While the policy response to the European sovereign debt crisis has reduced the risk of an adverse outcome and increased the prospect of sustainable long term growth, it is expected to slow the global recovery," the Bank's statement said.

In Canada, the recovery will continue but at a slower place than the Bank predicted in April. Growth will hit 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. It will be late 2011 before the economy regains full steam.

"This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada."

The Bank said housing activity is slowing sharply and, while job-creation has picked up, the needed rebound in business investment has yet to materialize.

"While employment growth has resumed, business investment appears to be held back by global uncertainties and has yet to recover from its sharp contraction during the recession," Carney said.

The next rate setting is Sept. 8. 

Courtesy of the Toronto Star