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Major banks matched the Bank of Canada's interest rate move, raising the prime rate.
CP 2004-10-20 03:06:39
OTTAWA -- The Bank of Canada raised its key policy interest rate by a quarter point to 2.5 per cent yesterday, setting the pace for a slight increase in many consumer borrowing costs. The move -- the bank's second rate hike in as many months -- was widely expected by financial markets and quickly matched by major commercial banks.
Many raised the prime rate they charge their best customers to 4.25 per cent from four per cent effective today.
Floating mortgage rates are also expected to follow the trend upwards.
Central bankers made it clear they're far from finished increasing borrowing costs.
But how quickly rates will rise and by what amount will depend on what happens in an economy that has been growing at a decent but far from fiery pace.
"Further reduction of monetary stimulus (higher interest rates) will be required over time to keep inflation on target, with the pace depending on the bank's continuing assessment of the prospects for factors that affect pressures on capacity and, hence, inflation," said a statement from central bankers.
Their words were softer than the aggressive tone taken last month, when the bank last increased rates, analysts said.
Since then, a rising dollar, higher oil prices and a somewhat softer export sector have slightly cooled the central bank's desire for tightening, said David Wolf, an economist with RBC Capital Markets in Toronto.
Its next opportunity to boost borrowing costs comes Dec. 7, but whether another rate hike will happen "is up in the air, it's going to depend on the inflation data," Wolf said.
The central bank admitted growth is slower than expected, trimming its forecast for next year's economic expansion to slightly less than three per cent from its prediction last summer of 3.5 per cent growth for 2005. It expects growth in 2006 will be stronger than three per cent.
The economy seems to be adjusting to surging oil prices and a stronger Canadian dollar, but those factors will restrain growth from really catching fire.
Still, the central bank is keeping an eye on inflation and has started tightening borrowing costs to head off a strong rise in consumer prices down the road.
Copyright © The London Free Press 2001,2002,2003
CP 2004-10-20 03:06:39
OTTAWA -- The Bank of Canada raised its key policy interest rate by a quarter point to 2.5 per cent yesterday, setting the pace for a slight increase in many consumer borrowing costs. The move -- the bank's second rate hike in as many months -- was widely expected by financial markets and quickly matched by major commercial banks.
Many raised the prime rate they charge their best customers to 4.25 per cent from four per cent effective today.
Floating mortgage rates are also expected to follow the trend upwards.
Central bankers made it clear they're far from finished increasing borrowing costs.
But how quickly rates will rise and by what amount will depend on what happens in an economy that has been growing at a decent but far from fiery pace.
"Further reduction of monetary stimulus (higher interest rates) will be required over time to keep inflation on target, with the pace depending on the bank's continuing assessment of the prospects for factors that affect pressures on capacity and, hence, inflation," said a statement from central bankers.
Their words were softer than the aggressive tone taken last month, when the bank last increased rates, analysts said.
Since then, a rising dollar, higher oil prices and a somewhat softer export sector have slightly cooled the central bank's desire for tightening, said David Wolf, an economist with RBC Capital Markets in Toronto.
Its next opportunity to boost borrowing costs comes Dec. 7, but whether another rate hike will happen "is up in the air, it's going to depend on the inflation data," Wolf said.
The central bank admitted growth is slower than expected, trimming its forecast for next year's economic expansion to slightly less than three per cent from its prediction last summer of 3.5 per cent growth for 2005. It expects growth in 2006 will be stronger than three per cent.
The economy seems to be adjusting to surging oil prices and a stronger Canadian dollar, but those factors will restrain growth from really catching fire.
Still, the central bank is keeping an eye on inflation and has started tightening borrowing costs to head off a strong rise in consumer prices down the road.
Copyright © The London Free Press 2001,2002,2003
