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BoC Hikes Another 1/4 Point

Bank-of-Canada-Benchmark-Rate It could have gone either way but Mark Carney and co. felt Canada’s economy was hot enough to warrant another tightening.

The Bank of Canada has therefore raised its overnight rate target to 1%, from just 0.25% three months ago.

Here’s the gist of the Bank’s written statement today:

  • “…Consumption growth is expected to remain solid and business investment to rise strongly.”
  • “The Bank now expects the economic recovery in Canada to be slightly more gradual than it had projected…”
  • “…Financial conditions in Canada have tightened modestly but remain exceptionally stimulative.”
  • “Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook.”

As a result of today’s increase, prime rate will likely climb to 3.00% this week. It would be the first time prime has seen 3% since February 2009.

If you’ve got a variable payment mortgage, this hike will add about $13 to your monthly payment, for every $100,000 you owe.*

The next BoC interest rate meeting is October 19.


* Assumes a 25-year amortization, semi-annual compounding, and a prime rate increase of 25 basis points.