Triston Rans - Calgary Mortgage Associate

Bank of Canada hikes rate again

By CBC News,, Updated: July 20, 2010 10:59 AM

The Bank of Canada raised its benchmark interest rate by 25 basis points Tuesday, the second straight time it has done so after keeping rates at unprecedented lows for more than a year.

In its latest policy decision, the bank opted to move its overnight lending rate to 0.75 per cent. The bank had previously raised its benchmark rate to 0.5 per cent in June after having kept rates at emergency lows since April 2009 in an attempt to stimulate the economy and spur lending.

In raising the rate, the bank moved to lightly hit the brakes on a Canadian economy that has shown signs of significant strength in recent months.

But the bank made it clear in its policy statement that it sees Canada’s economy recovering more gradually than it did in its previous outlook in April. It now projects GDP growth of 3.5 per cent in 2010, 2.9 per cent in 2011 and 2.2 per cent in 2012.

The bank also made it clear that future rate hikes are not guaranteed.

“Any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments,” the bank said in its statement.

Further rate hikes can’t be ruled out, BMO economist Michael Gregory noted.

“The bank’s forward-looking language does not preclude further rate hikes,” he said.

“[But] the bank now has more wiggle room to raise rates … if they want to. And we think they will.”

The next scheduled date for announcing the overnight rate target is Sept. 8. (Copyright: (C) Canadian Broadcasting Corporation,

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