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.
All BC Biz Stories