Skip to main content

Bank of Canada raises key interest rate to 4%

Updated Tue. Apr. 25 2006 11:29 PM ET
CTV.ca News Staff
The Bank of Canada boosted its trend-setting overnight rate by a quarter of a percentage point to four per cent on Tuesday.
The latest hike will impact the prime interest rate charged by commercial banks, affecting variable mortgage rates, as well as the cost of car loans and lines of credit.
This marks the sixth consecutive rate increase by the Bank of Canada since last summer -- when it was 2.5 per cent -- and some are wondering how many more rate hikes could be on the way.
In its statement today, central bankers said 'some modest further increase in the policy interest rate may be required to keep aggregate supply and demand in balance and inflation on target over the medium term.'
The Bank of Canada said the global economy is strong. 'At the same time, global competition and the past appreciation of the Canadian dollar continue to pose challenges for a number of sectors of the economy.'
Meanwhile, the core inflation rate appears to be staying within the central bank's target band of one to three per cent. Data released last week shows core inflation held steady at 1.7 per cent in March.
Canada's annual inflation rate remained unchanged at 2.2 per cent in March as higher gasoline prices were offset by lower prices for computer gear and clothing.
'Against this backdrop, the Bank decided to raise its target for the overnight rate,' said central bankers.
CTV's business editor Linda Sims said this probably means at least one rate hike is likely on the way. However, the rate is still quite low, compared to historic levels.
'We have got good job growth and decent economic growth in this country," Sims told CTV Newsnet.
"It will not put much of a crimp on the economy, including the housing market, going forward."
The next announcement on the overnight rate is scheduled for May 24.
Looking forward, the Bank of Canada predicts the Canadian economy will grow by 3.1 per cent in 2006, 3.0 per cent in 2007, and 2.9 per cent in 2008.

Comments

Popular posts from this blog

Where to invest in real estate now

"Want to buy a house in Vancouver? Hope you have lots of cash. The average price of a house in Lotus Land hit $490,004 in February. Think about it for a second. That's nearly half a million dollars--and 26.5% higher than a year ago. Put another way, it now takes a household income of $142,000 a year to comfortably purchase a place to live. Wasn't the real estate market supposed to slow down this year? Apparently not. And it's not just Vancouver that's experiencing double-digit price increases so far this year. Canadian Real Estate Association (CREA) figures show the average home price from February 2005 to February 2006 rose 26% in Calgary and 15.5% in Edmonton, both economic boomtowns of late. But even relatively moribund Toronto saw an increase of nearly 6%, for an average price of almost $354,000. That's a lot of money to put on the line if you're thinking of investing in the real estate market--let alone looking for a place to live. No wonder people are...

Canada's recession resilience (article below)

There will be lots of information coming out today. Bank of Canada governor Mark Carney will be explaining (maybe vaguely) the reasons for the BoC rate drop and expectations we should have for the future, quantitative easing (printing money), and how this will all affect the Canadian economy. Here is an article from the Financial Post that expands on this. Keep an eye on this as it will affect bond rates/yields which could affect mortgage rates. Terence Corcoran: Quantitative schemes at the Bank of Canada Posted: April 22, 2009, 9:17 PM by Ron Nurwisah Terence Corcoran , central banks On Thursday we will learn what the Bank of Canada will do next to stimulate the economy, how it will apply the now famous “quantitative easing” phase of its ongoing effort.The bank is already giving away money, setting an overnight rate of 0.25% — “virtually zero,” as former governor John Crow says in his commentary . At the chartered banks, astute mortgage borrowers can almost lock in less than 2% for...