TORONTO – The Bank of Canada has decided to go ahead with another interest rate hike, raising its benchmark interest rate to 1.5 per cent, which is expected to further depress the already .
The bank meets every six weeks to decide on what its interest rate will be, based on what it sees happening in the economy. This time, the bank has decided to raise its rate by 25 basis points — 0.25 percentage points — to 1.5 per cent. It’s the fourth time the central bank has raised its rate since last summer, reported CBC News.
Three of the biggest Canadian banks have already moved in response, with Royal Bank of Canada hiking its prime rate to 3.7 per cent starting Thursday, up 25 points from 3.45 per cent previously. TD and BMO quickly followed suit, and the others are expected to do the same in short order.
The central bank tends to cut its rate when it wants to stimulate the economy and raise it when it wants to keep a lid on inflation.
The move was exactly what economists who monitor the bank were expecting, as a recent slate of numbers from Statistics Canada suggest the economy is expanding, the job market is doing well, and inflation is inching higher.
In its decision to hike, the bank noted in a statement that the housing market is stabilizing, commodities such as oil are starting to rally, and businesses are starting to spend again. From the bank’s point of view, those are all good signs for the economy.
But the bank also said it is keeping an eye on tariff disputes, specifically those on Canadian steel and aluminum. On the whole, the bank doesn’t think the impact will be too harsh, reported CBC News.
