Canada central bank ups key lending rate to 1.0%

Canada central bank ups key lending rate to 1.0%

Canada central bank ups key lending rate to 1.0%

This was only the second time in seven years the Bank raised the rate; the first time was July 12 when it boosted the rate to 0.75% from 0.5%, where it had sat since July 2015. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

"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", wrote the Bank in a statement.

In a statement, the Bank of Canada noted that consumer spending remains robust, "underpinned by continued solid employment and income growth".

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.

The Canadian dollar gained more than a penny in reaction to the news on Wednesday, and was changing hands at 82 USA cents, the highest level since June 2015.

Given the stronger-than-expected economic performance, Governing Council judges that today's removal of some of the considerable monetary policy stimulus in place is warranted.

The Bank of Canada is raising its target for the overnight rate to 1 per cent.

Launched on July 1, 2016, Daily Hive is the evolution of Vancity Buzz and is now in Vancouver, Calgary, Toronto, and Montreal.

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"While we can't rule out another rate hike before the end of this year, we should note that the economy is still overly dependent on the heavily indebted household sector to support economic growth".

The bank advised that it is still on watch for potential speed bumps, such as geopolitical risks and uncertainties that abound, such as concerns about global trade and undetermined fiscal policies throughout the globe.

The decision "implies that absent a significant shock, Wednesday's rate increase will be part of a larger and longer march towards interest-rate normalization", said Brian DePratto, TD Bank economist.

In its statement, the bank also said headline and core inflation have seen slight increases since July, largely as expected.

As is often the verbiage of central banks, no future moves are set in stone, as they will be determined by analysis of economic data and other developments.

The Bank of Canada forged ahead with another interest rate hike in a nod to the country's surging economy, while signalling its appetite for further tightening may be curbed by a rising Canadian dollar and sluggish inflation.

But particular focus, it said, will be given to labor market conditions, and given Canadians' high level of indebtedness, "to the sensitivity of the economy to higher interest rates".

The Canadian dollar surged as much as 2.2 percent to post its strongest since June 2015 at C$1.2140.

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