Market watchers are widely expecting the Bank of Canada to raise its benchmark interest rate a quarter-point to 4.50 per cent when it meets Tuesday morning.

It would be the first interest rate increase since May 2006, and spark higher borrowing costs for everything from credit cards to mortgages.

"Bank of Canada has an itchy finger on the rate trigger," said TD Economics in a report summing up last week's economic activity. "At this point it's a bit of a no-brainer that they will raise rates on Tuesday. And even the high-flying loonie at 95 U.S. cents won't deter them."

Last week the loonie climbed to yet another 30-year high of 95.58 cents U.S., following a stronger than anticipated Canadian unemployment report.

The Canadian dollar has gained more than 10 per cent this year and has climbed more than 45 per cent in five years.

When the Bank of Canada announces its interest rate decision Tuesday, it will also release a statement outlining its views on Canada's economic health. Any comments alluding to future interest rate hikes could very well send the loonie even higher.

Erin Weir an economist at Canadian Labour Congress, representing 3.2 million Canadian workers, doesn't welcome an interest rate hike.

"I, most strongly, renew the call I made last week to the governor of the Bank of Canada, Mr. David Dodge, not to raise interest rates. Higher rates would have a crippling effect in the sectors that provide good jobs with good wages," Weir said in a statement.

The strong Canadian economy has been fuelled by rising commodity and energy prices. That's helped to push up inflation over the two per cent target ceiling, making the Bank of Canada more likely to raise rates.  

The interest rate announcement will be announced at 9 a.m. Tuesday.