Bank of Canada governor Stephen Poloz announced an increase in the benchmark interest rate this morning bringing it to 1.5 per cent.
“there will be difficult adjustments for some industries and their workers”
The quarter of a percentage point increase is the second since January this year, and the fourth in the past twelve months.
Interest rates have increased a full one percent now, since July last year, due to steady economic growth and employment gains.
(Click to hear Governor Stephen Poloz on this latest increase)
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The Bank of Canada, a close-up detail, is seen in Ottawa on May 30, 2018. (CP/Sean Kilpatrick)
Poloz explained the monetary policy behind today’s move “given the various uncertainties we face”, he said.
The labour market has been strong and inflation is on target, Poloz said, but he acknowledged that current trade tensions are the biggest issue facing the country.
The recent tariff disputes, particularly the effect of those recently imposed on Canadian steel and aluminum is a concern, but the bank doesn’t foresee a major downturn in the near future.
“Although there will be difficult adjustments for some industries and their workers, the effect of these measures on Canadian growth and inflation is expected to be modest,” the bank said.
Today’s increase brings the rate to a nine-year high.
Also known as the overnight rate, this is the interes retail banks pay for short term loans, and then it affects what we consumers pay to those banks for services such as mortgages, lines of credit and savings accounts.
Poloz cautioned that 2020 and 2021 may be challenging years for many borrowers, as they will be renegotiating mortgages taken out when interest rates were at their lowest.
The bank meets every six weeks to decide on the interest rate, depending on what it is happening in the Canadian economy.
The next decision on interest rates is expected on September 5th.
(With files from CBC)
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