The Bank of Canada has raised its benchmark interest rate by a quarter of a point. This is the fifth time since last summer that the Bank of Canada has pushed up the cost of borrowing for Canadians.
The central bank’s target for the overnight rate is now set at 1.75 per cent.
The cost of loans linked to the big bank prime rates are headed higher in the wake of the Bank of Canada’s decision to raise its key interest rate target by a quarter of a percentage point. The Canadian banks each raised their prime lending rates to 3.95 per cent from 3.70 per cent, effective Thursday, October 25, 2018.
The increase followed governor Stephen Poloz’s first policy meeting since Canada agreed with the United States and Mexico earlier this month on an updated North American free trade deal. It was the bank’s first rate decision since Canada agreed with the United States and Mexico earlier this month on an updated North American free trade deal.
So far, the Bank of Canada has stated that Canadians have been making spending adjustments in response to earlier rate hikes and stricter mortgage policies — and credit growth continues to moderate. Household vulnerabilities — while still elevated — have edged down as a result.
Consumer spending is expected to continue expanding at a “healthy pace,” thanks in large part to the steady rise of incomes and the strength of consumer confidence. It projects exports to keep growing at a moderate clip, even though they will face limitations from several factors — including transportation capacity constraints, global trade uncertainty and stiff competition, particularly from the U.S.
Known as the target for the overnight rate, the benchmark is what Canada’s big banks charge each other for short-term loans. It filters down to consumers, because it affects the rates the banks offer their customers for things like variable rate mortgages and savings accounts.
The bank says households have already made spending adjustments in response to earlier rate hikes and stricter mortgage policies _ and credit growth continues to moderate.