Prime rate increase

Posted Sep 2010

The Bank of Canada (BoC) just increased its overnight rate target to 1% – which isn't a surprise.

The BoC also announced yesterday that it is raising its target for the overnight rate by 0.25%, thus changing the prime lending rate to 3.00%.

Economic activity in Canada was slightly softer in the second quarter of 2010 than the BoC had expected. Going forward, growth is expected to remain solid and business investment to rise strongly. Both are being supported by accommodative credit conditions, which have eased in recent weeks, mainly owing to sharp declines in interest rates around the world.

The BoC now expects the economic recovery in Canada to be slightly more gradual than it had projected in its July Monetary Forecast, largely reflecting the U.S. weaker-growth picture. Inflation in Canada has been broadly in line with the BoC's expectations, and its dynamics are essentially unchanged.

The next Bank of Canada rate announcement will be on Oct 19, 2010. Stay tuned!