The Bank of Canada raised its benchmark interest rate by 25 basis
points Tuesday, the second straight time it has done so after keeping
rates at unprecedented lows for more than a year.
In its latest policy decision, the bank opted to move its overnight
lending rate to 0.75 per cent. The bank had previously raised its
benchmark rate to 0.5 per cent in June after having kept rates at
emergency lows since April 2009 in an attempt to stimulate the economy
and spur lending.
In raising the rate, the bank moved to lightly hit the brakes on a
Canadian economy that has shown signs of significant strength in recent
months.
But the bank made it clear in its policy statement that it sees
Canada's economy recovering more gradually than it did in its previous
outlook in April. It now projects GDP growth of 3.5 per cent in 2010,
2.9 per cent in 2011 and 2.2 per cent in 2012.
The bank also made it clear that future rate hikes are not
guaranteed.
"Any further reduction of monetary stimulus would have to be weighed
carefully against domestic and global economic developments," the bank
said in its statement.
The next scheduled date for announcing the overnight rate target is
Sept. 8.
