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

Reel Reviews: A shallower Deadpool

We say, “It is more of the same for Deadpool 2.”

Kelowna Vegan Festival takes over the Rotary Centre

The plant based creations stem from wanting to create a product that brings people together

UPDATE: West Kelowna fire deemed suspicious, crews dousing hot spots

Boucherie fire quiet overnight, mop-up continues, while evacuees have returned home.

Where to find the best ingredients for a vegan charcuterie board in the Okanagan

It’s warming up, pair your summer whites with a vegan charcuterie creation

Airbnb hosts earning millions in the Okanagan

The Okanagan was among the list of three Canadian wine markets.

Trans Mountain pipeline: Is it worth the risk?

Concerns range from the threat of an oil spill to the impact of tanker traffic on wildlife

Wildfire sparked north of Merritt, estimated 8 hectares

BC Wildfire Service is responding to the fire near Chattaway Lake FSR 27 kilometres north of Merritt

Call for artists for upcoming South Okanagan exhibition

The Penticton Art Gallery is inviting artists from across the globe to submit artworks

B.C. to spend $181M to create 200 general practitioner jobs

Jobs will go to new medical school graduates

Vernon company wins Ozone best production

Powerhouse Theatre’s Calendar Girls will move on to the Theatre BC Mainstage Festival

Host AquaJets fly at long course invitational

Kelowna swim club wins team title at annual spring meet at H2O

Federal leaders trade barbs about India trip at press gallery dinner

Justin Trudeau’s infamous trip to India earlier this year was the focus of many of the jabs

Most Read