Central bank hikes rate, predicts modest overall impact from U.S. tariff fight

OTTAWA — The Bank of Canada is raising its benchmark interest rate in an economy that it predicts will remain resilient even as it faces an even bigger bite from deepening trade tensions.

The hike is the central bank’s first interest rate move in six months and lifts the trend-setting rate to 1.5 per cent, up from 1.25 per cent.

The bank says persistent trade uncertainty and Canada’s tariff fight with the United States will shave nearly 0.7 per cent from economic growth by the end of 2020 — but it predicts the blow to be largely offset by the positive impact of higher oil prices.

The Bank of Canada is also releasing its quarterly update of projections, which predicts slightly stronger growth in both 2019 and 2020, compared with its outlook in April.

The central bank says Canadian growth will continue to see bigger contributions from exports and business investment, while it expects household spending to represent a smaller share due to the dampening effects of higher interest rates and stricter mortgage rules.

Looking ahead, the bank says it expects higher interest rates will be necessary over time to keep inflation near its target, however, it intends to continue along a gradual, data-dependent approach.

Just Posted

Olympic ski run designer creates upgrades at Canyon Ski Resort

Jeff Ihaksi says free-style and alpine ski venues are Canada Winter Games-worthy

Updated: Collision expert backs version of crash of driver accused of manslaughter

Daniel Newsham accused of manslaughter in fatal 2016 collision

Red Deer artist highlights the dinosaur connection of Alberta birds

Jeff Powers is fascinated by winged creatures

Murder charges laid against woman from the Sunchild First Nation

The 25-year-old female victim was found dead on Dec. 12

WATCH: CP Holiday Train rolls into Lacombe

Kelly Prescott performed for hundreds of Central Albertans

Fashion Fridays: How to change your beauty routine

Kim XO, lets you in on her style secrets each Fashion Friday on the Black Press Media Network

WHL’s Thunderbirds, Silvertips open to NHL joining Seattle hockey market

TORONTO — The Seattle area’s major junior hockey teams aren’t worried about… Continue reading

Canadian freestyle skier Karker excited for Dew Tour’s modified superpipe

Rachael Karker has a renewed sense of confidence heading into her second… Continue reading

CBS settled with Dushku over ‘Bull’ star’s sexual comments

LOS ANGELES — CBS reached a $9.5 million confidential settlement last year… Continue reading

Kanye reignites Drake feud on Twitter, alleges threats

LOS ANGELES — Kanye West is not sending Christmas cheer to Drake.… Continue reading

Councillors in Toronto, Ottawa vote to allow retail cannabis stores

TORONTO — Councillors in Toronto have voted to allow retail pot shops… Continue reading

Barry Cooper: Separation has become a real possibility, thanks to Ottawa’s abuses

In the past couple of weeks, a retired senior oil executive, Gwyn… Continue reading

Most Read