After a summer of surprisingly good economic news, the Bank of Canada raised its benchmark interest rate a quarter of a percentage point to 1 per cent – its second rate hike in less than two months and a prelude to higher borrowing costs for Canadians.
"Recent economic data have been stronger than expected, supporting the bank's view that growth in Canada is becoming more broadly based and self-sustaining," the bank said in a generally upbeat overview of economic conditions. "The level of GDP is now higher than the bank had expected."
The Bank of Canada may not be done. Economists are already bracing for further hikes if the economy continues to show strength through the rest of the year.
But there are limits on how far and fast the Bank of Canada can get its benchmark rate back to a more normal level.
Rising interest rates will reverberate through the housing and consumer-lending markets, squeezing homeowners who have taken on record debt levels to buy homes and fuel spending.
The bank's next scheduled rate-setting is Oct. 25, when the bank is also due to release its quarterly forecast.
Source: The Globe and Mail