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

B.C. BUDGET: Fare freeze, free travel for seniors on BC Ferries

A complete fare freeze will be put into place on major routes, and fares will be rolled back on smaller routes by 15 per cent

Victoria cannabis advocates call proposed trust fund an ‘overreach’

BCICA says North Saanich councillor’s ideas on cannabis ‘cherry picking’

BC BUDGET: New spaces a step to universal child care

Fees reduced for licensed daycare operators

BC BUDGET: NDP cracks down on speculators, hidden ownership

Foreign buyers’ tax extended to Fraser Valley, Okanagan, Vancouver Island

BC BUDGET: Payroll tax replaces medical premiums

Health spending to increase $1.5 billion for drugs, primary care teams

VIDEO: Top 10 B.C. budget highlights

The NDP is focusing on childcare, affordable housing and speeding up the elimination of MSP premiums

How to keep local news visible in your Facebook feed

Facebook has changed the news feed to emphasize personal connections. You might see less news.

Canucks blow three goal lead, lose to Avalanche in overtime

Vancouver struggled on the penalty kill, as Colorado scored all five goals on the powerplay

Widow of avalanche victim sues Golden lodge operator

A woman from Alberta is suing guides, their mountain guide association and the lodge operator for negligence

BC BUDGET: NDP hope to nix court delays with $15 million cash influx

Union says funding could stop sheriffs from leaving for higher paid jobs

Cattlemen urge B.C. to prevent erosion caused during 2017 wildfire season

Other concerns are fencing restoration and repair, and a lack of feed for cattle.

Patrick Brown’s Tory leadership bid fate looms

Brown’s bid to for Tory leadership to be decided on Wednesday

Duncan cousins found guilty of aggravated sexual assault

Assault so violent, victim required surgery

Alberta shrugs off B.C. legal challenge on wine ban

The potential fine Alberta faces for violating free trade rules according to economic development minister

Most Read