Bank of Canada raises interest rate to 1 per cent

Increase comes as country’s powerful growth broadens

The Bank of Canada is once again raising its benchmark interest rate as it sees the economy’s powerful performance pointing to broader, more self-sustaining growth.

The central bank hiked its rate Wednesday by one-quarter point to 1.0 per cent, its second 25-basis-point increase since July.

The move, which will likely be a surprise for some, came less than a week after the latest Statistics Canada numbers showed the economy expanded by an impressive 4.5 per cent in the second quarter.

That followed unexpectedly healthy growth in the first three months of 2017 and easily exceeded the Bank of Canada’s projections.

In a statement Wednesday, the bank said solid employment and wage growth led to strong consumer spending, while the key areas of business investment and exports also improved.

“Recent economic data have been stronger than expected, supporting the bank’s view that growth in Canada is becoming more broadly-based and self-sustaining,” the bank said.

Looking ahead, the bank insisted future rate decisions will not be “predetermined” and will be guided by upcoming economic data releases and financial market developments.

It pledged to pay particular attention paid to the economy’s potential, job-market conditions and any potential risks for Canadians from the higher costs of borrowing.

“Given elevated household indebtedness, close attention will be paid to the sensitivity of the economy to higher interest rates,” the statement said.

Even with the recent economic improvements, the bank still underlined concerns around geopolitical risks and uncertainties related to international trade and fiscal policies.

The bank predicted the pace of growth to moderate in the second half of the year.

The rate increase means governor Stephen Poloz has now reversed the two cuts he introduced in 2015 to help the economy deal with the plunge in oil prices. The bank said Wednesday the increasingly robust economy shows it no longer needs as much stimulus.

The rate hike Wednesday likely came as a bit of a surprise for some experts. Many had been expecting Poloz to wait until October before introducing the second increase.

Following a quiet August for bank officials, some believed the bank would hold off because hadn’t clearly telegraphed a September hike.

Others predicted the bank would refrain from moving the rate out of concern such a move would drive up an already strengthening Canadian dollar and pose a risk to exporters.

In its statement, the bank also said headline and core inflation have seen slight increases since July, largely as expected. It noted, however, that upward pressure on wages and prices remain more subdued than historical trends would suggest, which has also been seen in other advanced economies.

Andy Blatchford, The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

City sells former RCMP building, land to province

Construction of new courthouse in Red Deer one step closer to reality

City increases parking rates by 25%

Red Deerians expected to pay increase in early fine payments

RCMP make arrests after bank robbery

Two suspects are in custody after using a needle to rob a CIBC in north Red Deer

WATCH: Lowe’s officially opens its doors in Red Deer

New retailer has created 128 permanent jobs

WATCH: Lacombe and Red Deer Chambers prepare members for cannabis legalization

Luncheon speaker educates businesses on marijuana policies

Suspected Toronto serial killer targeting gay community arrested

A 66-year-old man is charged with first-degree murder in disappearance of two Toronto men

Barenaked Ladies, Steven Page, to be inducted into Canadian Music Hall of Fame

Canadian band to get top honours at 2018 JUNO Awards

B.C. out of the running for Amazon’s next headquarters

Toronto is the only Canadian city left in the running despite the province backing Metro Vancouver’s bid for new Amazon headquarters

Post interest rate hike debt tips

What to do about your debt and mortgages after the interest rate hike

Foreign workers sleeping in Alberta Burger King basement

Alberta Health Services said its inspectors found foreign workers sleeping in the basement of the Lethbridge restaurant

Court application halts release of bread price-fixing documents

Bread price-fixing documents won’t be unsealed Thursday, Loblaw says

Pharrell and N.E.R.D to headline NBA All-Star halftime show

11-time Grammy winner Pharrell and his hip hop-rock band N.E.R.D. will headline the halftime show at the 2018 NBA All-Star game in Los Angeles

Heritage Minister wants zero tolerance for harassment in entertainment industry

Heritage Minister Melanie Joly had two meetings to discuss harassment in the film, TV and theatre worlds

Most Read