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

Bear spotted in Qualicum Beach

Full-grown bear spotted in complex at Berwick and Rupert roads

Canadians on epic journey arrive in Nanoose

Snaw-Naw-As First Nation welcomes participants of Canada C3 voyage

Kwalikum Secondary student back from year in Netherlands

Don’t pass up opportunity to travel with Qualicum Beach Rotary’s help, says Taylor Hunter

Resident slam loud dynamite blasting at Cedar Ridge Estate development

Sleigh feels insulted by Mayor Lefebrve who failed to understand their suffering

RDN creates new service to fund INfilm

Regional district to enter three year agreement with film commision for annual funding of $50,000

VIDEO: Sears liquidation sales continue across B.C.

Sales are expected to continue into the New Year

B.C. NDP convention set for Victoria

Premier, federal leader Jagmeet Singh to add energy

Silver Creek farm search expands north

RCMP were seen collecting evidence three kilometres north of the farm where human remains were found

Qualicum Beach residents discuss long-term vision for community wellness

Three more meetings on topic scheduled for Oct. 24 and 25

VIDEO: Motorcycle catches fire in Nanaimo traffic

Motorcyclist takes fast action to get burning bike off the road along the old Island Highway

Open house features both sides of the issues on Bowser sewage project

New association opposing marine outfall use event to also express their concerns

Nanaimo man assaulted, tied up and robbed at his home

Incident occurred about 7 a.m. Monday, Oct. 23 at a home on Beverly Drive

Parksville draft park plan goes before public

People invited to open house Oct. 28 at Parksville Community and Conference Centre

Most Read