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

Missing teen reportedly spotted in Northwest

Police, family greatly concerned over disappearance of Colten Therrin Fleury

Police, Conservation see busy long weekend

Arrests, tickets and warnings follow joint-enforcement initiative

Injury forces end to hiker’s Pacific Crest Trail attempt

Due home this week, Janine Wilson still determined to finish challenge in the future

Vancouver choir to perform joint-concert with two local ensembles

Concert will take place on Saturday, May 26 at the Knox United Church

Construction of LNG Canada plant still on hold

Construction will only begin following a positive final investment decision

Syrian refugee fathers thriving at Skeena Sawmills in Terrace

With work at the mill, the Al Kadro family bought a home and is settling into the local community

B.C. RCMP swoop in to save injured eagle

An eagle with a broken wing now in a recovery facility after RCMP rescue near Bella Coola

Bug spray 101: Health Canada wants you to stay bite free

Health Canada is reminding Canadians to use bug spray and other insect repellents safely

Unions reject CP Rail contract offers

Both meeting Friday to determine next steps; 72 hours notice required before strike action.

B.C. jewellers warn public about fake gold scam

‘They are playing on people’s sympathy and their greed’

Former B.C. premier says pot industry about to enter Wild West

Mike Harcourt says Canada is about to enter a new gold rush with many dreaming of striking it rich

Hunt continues for two suspects in Ontario restaurant explosion

The explosion left 15 people injured, but all victims have now been released from hospital

B.C. teacher charged with sexual offences involving two teens

Henry Kang, 50, of Abbotsford charged with two counts each sex assault and sexual exploitation

Toronto Raptors star to hold basketball camp in B.C.

DeMar DeRozan is hosting a four-day camp for players aged 6-16 at the University of Victoria

Most Read