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

Wetaskiwin RCMP investigate indecent act at By The Lake Park

Complaint said man exposed himself in Wetaskiwin

Wetaskiwin RCMP investigate attempted armed robbery

Police seek information about alleged attack and identify suspect

Liquor store robbed in Wetaskiwin

Two suspects robbed Gentleman’s, assaulted staff member

2019 City of Wetaskiwin by-election will be held Sept. 11

Proof of identification needed to vote for two vacant council positions

Leduc RCMP arrest Leduc male for trafficking heroin

Warren Frederick Young, 43, also facing four counts of breaching a recognizance

Feds lowered poverty line, reducing the number of seniors in need: documents

Liberals introduced a poverty line that was below the prior low-income cutoff

$900M settlement reached in class action on sexual misconduct in Canadian military

After facing criticism, the government moved to begin settlement proceedings in early 2018

Chiefs honour Indigenous leader wrongfully hanged in B.C. 154 years ago today

Chief Joe Alphonse says they want his remains returned to his homeland in B.C.’s Cariboo region

Scrapie, a disease related to mad cow, found in two flocks of sheep in Alberta

Health Canada says there is no known link between scrapie and human health

Alberta oil and gas producer cleanup cost estimates set too low, says coalition

Canadian Natural Resources Ltd. facing the largest bill at $11.9 billion to clean up 73,000 wells

Scheer on Trump: It’s ‘offensive’ to question the family background of critics

Trump is being called a racist for saying that the four congresswomen should go back where they came from

Instagram expands Canadian pilot removing ‘like’ counts to more countries

Social media giant plans to roll out the test in Australia, New Zealand, Brazil, Japan, Italy and Ireland

Natural gas producers demand government action in open letter to Kenney

The letter warns that the viability of the natural gas sector is in jeopardy

Remains of missing Edmonton woman discovered outside of North Battleford: RCMP

The 25-year-old Edmonton woman was reported missing on May 12

Most Read