The Bank of Canada has raised its key interest rate as expected to 0.75 per cent — the central bank's first move upward in the cost of borrowing in seven years.
The bank's target for the overnight rate — at which major financial institutions make one-day loans to each other — moved up by one-quarter of a percentage point from 0.50 per cent.
In a statement accompanying the rate decision, the central bank said the Canadian economy has been robust, fuelled by household spending.
Economic data have been encouraging over the past few months, globally and especially for Canada, says Governor Poloz pic.twitter.com/McGvUl8TQh
— Bank of Canada (@bankofcanada) July 12, 2017
"As a result, a significant amount of economic slack has been absorbed," the bank said, adding that the remaining slack is expected to be gone around the end of this year, which is earlier than the bank anticipated in its April Monetary Policy Report.
The move means consumers will likely pay more for borrowing such as variable-rate mortgages and lines of credit.
MPR: Canada forecast for real GDP: 2.8% in 2017, 2.0% in 2018 and 1.6% in 2019. #cdnecon pic.twitter.com/NxmUZ2Stf1
— Bank of Canada (@bankofcanada) July 12, 2017
RBC RAISES PRIME RATE BY 25 BASIS POINTS FOLLOWING RATE HIKE FROM CENTRAL BANK
Royal Bank of Canada (TSX:RY) is boosting its prime lending rate by 25 basis points after the central bank hiked its benchmark interest rate today.
The increase will bring RBC's prime rate to 2.95 per cent from 2.7 per cent, effective Thursday.
The prime lending rate is the rate that banks use to set interest rates for variable-rate mortgages and other loans.
The move comes after the Bank of Canada raised its key interest rate for the first time in seven years on Wednesday to 0.75 per cent from 0.5 per cent.
