Interest rate rises
Posted Sep 8, 2010 03:41:17 AM.
This article is more than 5 years old.
OTTAWA – The Bank of Canada has raised the trend-setting interest rate a quarter point to one per cent, even as it acknowledged that the country’s economic growth will be more gradual than previously thought.
It’s the third hike in three months, taking the overnight rate up in stages from the rock-bottom 0.25 per cent that was set by the central bank during the recession to help stimulate the economy.
The central bank appears to be generally satisfied with how the recovery is unfolding in Canada, and it believes domestic consumption will remain solid while business investment rises strongly.
Most economists had expected bank governor Mark Carney to lift the rate, which affects loans tied to the prime rate such as variable-rate mortgages and some lines of credit.
But some were skeptical a hike is the best option, since the economic recovery has not been as strong as originally hoped and there are clear signs of weakness in Canada’s biggest trading partner, the United States.
The Bank of Canada does warn that weakness in the U.S. remains the biggest drag on the Canadian economy and is likely responsible for the slower-than-expected recovery here.
