The Bank of Canada has raised its key interest rate as expected to 0.75 per cent — the central bank’s first move upward in the cost of borrowing in seven years.
The bank’s target for the overnight rate—at which major financial institutions make one-day loans to each other—moved up by one-quarter of a percentage point from 0.50 per cent.
The move means consumers will likely pay more for borrowing such as variable-rate mortgages and lines of credit.
With the Canadian economy as a whole performing well, the bank has also nudged up its forecast for growth this year. The bank said real gross domestic product (GDP) is now expected to grow by 2.8 per cent in 2017, up from the April outlook of 2.6 per cent.
Many chief economists for Canada’s major banks believe the bank’s move signals a turning point to a longer-term trend in rising interest rates, and that they expect to see more rate hikes moving forward.
Any future changes to the central bank’s key interest rate will depend on economic data in the months ahead.
The bank’s next decision on interest rates is scheduled for September 6.