Bank of Canada raises Variable Rates by 0.25%
After more than a year at a record low level, Bank of Canada Governor Mark Carney raised the benchmark interest rate for the first time since 2007 by one-quarter percentage point to 0.5 per cent. This is the first time since July 2007 that the Bank of Canada has increased rates and Canada is the first of the G7 countries to do so. We are also one of the few industrialized countries to start raising rates.
This means that Prime is now 2.50% with each of the Canadian Banks. Most mortgage rates are at a discount from prime of up to 0.6% – with the lowest variable mortgage currently 1.90%.
The Bank was very careful to state that this does not signal more rate hikes in the future. While domestically the recovery seems strong, there are many international influences, particularly in southern Europe that threaten the global recovery and could trigger another global recession. Only time will tell.
“This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending and the uneven global recovery,” the central bank said. “Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.”
