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profishingrods.com July 17, 2018


Bank of Canada Hikes Interest Rate to 1.50%, CAD Climbs in Response

13 July 2018, 12:07 | Joann Bryant

Bank Of Canada Raises Key Lending Rate To 1.5%. Here's What That Means For You

Image of Bank of Canada calendar

The central bank's rate decision arrives as Canada faces significant trade-related uncertainties, including stalled NAFTA talks, USA steel and aluminum tariffs and the threat of more duties on the automotive sector.

It was the central bank's fourth rate increase in the last 12 months.

But Mortgages of Canada CEO Samantha Brookes says those with variable-rate mortgages will now face higher interest payments, a concern for many Canadian households that are already saddled with hefty debt loads.

The decision will likely prompt Canada's big banks to raise their prime rates, thereby passing on the rate increase along to their customers.

But even with such unknowns, TD chief economist Beata Caranci said she expects Poloz to work with the positive data he has in front of him. The tariff fight, the bank estimated, will shave almost 0.7 per cent from Canada's economic growth by the end of 2020.

The Bank said Canada's economy is operating "close to capacity", implying that it expects to see inflation rise in the future.




Another decision on interest rates is expected in September.

"It's evident to us that higher interest rates will be warranted, but of course we're not in a position to say exactly how much higher or at what rate we might get there", Poloz told a news conference Wednesday in Ottawa. Talks to renegotiate the North American Free Trade Agreement stalled earlier this year, and Canada imposed retaliatory tariffs this month. Temporary factors are causing volatility in quarterly growth rates: the Bank projects a pick-up to 2.8 per cent in the second quarter and a moderation to 1.5 per cent in the third.

The Bank of Canada has increased its key interest rate by a quarter-point to 1.5 per cent in a move that was widely expected.

So what does the rate hike mean for Canadians?

Poloz also signaled he was comfortable with how financial markets were interpreting the central bank's message, noting the hike was "highly anticipated".



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