Today, September 6, 2017, The Bank of Canada raised its target overnight rate by another .25% to 1.0% making this the second rate hike in a row. The cause of this action is most likely the 4.5% growth in Gross Domestic Product in the second quarter of the year, despite the recent increase in value of the Canadian dollar, and a below target rate of inflation.
Compared to the economy of the US, we have outperformed them considering the battering they are taking as a result of two hurricanes, Harvey and Irma. According to the Bank of Canada’s press release Canada is becoming “more broadly based and self-sustaining”. Last weeks second quarter GDP release showed “solid employment and income growth”. Business and investment growth has also picked up but we should show a more moderate pace of economic growth in the second half of the year.
The bank does say that it will keep an eye on household indebtedness and the markets reaction to changes in the interest rate, however, it is welcoming a slowdown in housing and borrowing activity.
Inflation is not a primary concern at the moment in as it remains below the target rate of 2%, along with subdued wage pressure.
The Bank of Canada has proven that further policy decisions are not predetermined but will depend on incoming economic and financial data.
Please see: Dr. Sherry Cooper “Bank of Canada takes Action”