The Bank of Canada is raising its benchmark interest rate to 0.75 per cent from 0.5 per cent, the first such raise in seven years driven by expectations the economy will register “above-potential growth.”
The interest rate hike is bound to increase the costs of mortgages, home equity lines of credit and other loans linked to the big bank prime rates.
The announcement comes following a series of data suggesting the economy had a strong beginning of the year and despite “softness in inflation.”
The central bank also cited the continued growth of the global economy even as it cautioned that “elevated geopolitical uncertainty still clouds the global outlook, particularly for trade and investment.”
“Canada’s economy has been robust, fuelled by household spending,” the bank said in a statement. “As a result, a significant amount of economic slack has been absorbed. The very strong growth of the first quarter is expected to moderate over the balance of the year, but remain above potential.”
With the adjustment to lower oil prices largely complete, growth is broadening across industries and regions and therefore becoming more sustainable, the bank said.
Both the goods and services sectors are expanding but the central bank said growth is expected to moderate from 2.8 per cent in 2017 to 2.0 per cent in 2018 and 1.6 per cent in 2019.
The last increase in the bank’s key interest rate was in September 2010.
For reasons beyond our control, and for an undetermined period of time, our comment section is now closed. However, our social networks remain open to your contributions.