Canada hikes interest rate to 1%, 3rd increase in a row

08 September 2010 14:43  [Source: ICIS news]

TORONTO (ICIS)--Canada’s central bank on Wednesday raised its target for the overnight rate by 0.25 percentage points to 1.0%.

The third rate hike in a row came despite softer second-quarter economic growth. Canada began raising rates in June, the first G7 country to do so following the recession.

The Bank of Canada said Canadian consumption was expected to remain solid and business investment would rise strongly.

However, it acknowledged that second-quarter GDP growth was weaker than it had anticipated.

“As a result of monetary policy measures taken since April, financial conditions in Canada have tightened modestly but remain exceptionally stimulative,” it said.

“Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook,” it added.

The global economic recovery was proceeding but remained uneven, balancing strong activity in emerging market economies with weak growth in some advanced economies, the bank said.

In the US, the recovery in private demand was being held back by high unemployment and recent indicators suggest a more muted recovery in the near term, it said.

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By: Stefan Baumgarten
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