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

Chilliwack Chiefs lose Kevin Wall to suspension

The team’s leading scorer was tagged with his second major of the season Sunday and sits four games.

Man charged with attempted murder in Chilliwack River Valley deemed mentally unfit

Father says son has schizophrenia; Law professor say too many with mental illness in jail

Four chances to see Chilliwack Symphony Orchestra’s Messiah in the Valley

Chilliwack Symphony Orchestra brings Handels’ Messiah to Chilliwack, Abbotsford, Langley, Aldergrove

United churches come together to share warmth in Chilliwack

Members of Rosedale, Chilliwack and Mt. Shannon united churches donate 100 care packages to homeless

Lots of laughs at Bozzini’s holiday concert in Chilliwack

Double bill performance features rock n’ roll duo Kitty & the Rooster, cabaret musician Shirley Gnome

Lawyer for Chinese exec detained by Canada says it’s ‘inconceivable’ she would flee

Meng Wanzhou was detained at the request of the U.S. during a layover at the Vancouver airport

Federal government plans examination of coerced sterilization

The Liberals have been pressed for a rapid response to recent reports on the sterilizations

Huitema, Cornelius named 2018 Canadian Youth International Players of the Year

Huitema was captain of Canada’s fourth-place team at this year’s FIFA U-17 Women’s World Cup

Canada not slowing emissions from oil and gas: environmental groups

New report released at the United Nations climate talks in Poland

Liberal Party moves Trudeau fundraiser from military base

The fundraiser is scheduled for Dec. 19, with tickets costing up to $400

Pipeline protesters arrested at B.C. university

Three protesters were arrested after TRU property allegedly vandalized with red paint

Family calls for change after death of B.C. man at St. Paul’s Hospital

Hospital beds for patients with both medical and mental-health issues are ‘very limited’: coroner

Goodale to ‘examine’ transfer of Rafferty to medium-security prison

Michael Rafferty was sentenced to life in prison in 2012 in the kidnapping, sexual assault and first-degree murder of Tori Stafford

‘Abhorrent’ condition of autistic B.C. boy shows flaws in care system: report

‘Charlie’ was underweight and ‘covered in feces’ when he was removed from his mom’s care

Most Read