Bank of Canada Raises Interest By .25%

Bank rate

CBJ — The Bank of Canada has raised its key interest rate as expected by 25 basis points to 0.75%. It’s the first increase in the rates in seven years.

The Bank’s decision means consumers will pay more for such things as variable-rate mortgages and lines of credit.

The interest rate increase had been widely expected after senior Bank of Canada officials signalled in speeches and interviews over the past weeks that lower rates had done their job, and the Canadian economy was performing well.

The Bank of Canada hadn’t increased the overnight rate since August 2010, when it nudged it up to 1%. After Stephen Poloz took over as governor of the bank, the rate was lowered twice in 2015 to 0.5%, where it remained until Wednesday.

“The Canadian economy no longer requires the rate cuts that were delivered to help reduce the negative fallout from lower commodity prices. Moreover, the tightening of monetary policy will help to incrementally reduce risks associated with high levels of household indebtedness and real estate price imbalances in parts of the country. Accordingly, the rate hike is welcome news,” said Craig Alexander, Senior Vice-President and Chief Economist, The Conference Board of Canada.


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