Canada Becomes First G-7 Nation to Raise Interest Rate
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Canada became the first Group of Seven nation to raise interest rates Tuesday since the the economic downturn, but the nation’s central bank said that any further increases would depend on the overall global economic condition.
The Bank of Canada increased its key interest rate to .50 percent, up a quarter of a point from .25 percent. The bank said that the European sovereign debt crisis has only caused limited fall in commodity prices.
"Thus far, the spill-over into Canada from events in Europe has been limited to a modest fall in commodity prices and some tightening of financial conditions," the bank said.
Canada said that it is maintaining its “considerable” monetary stimulus, despite the announced interest rate hike.
"Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments," the bank said in its interest-rate statement.
The move was expected by many economists following the 6.1 percent growth that the Canadian economy saw in the first three months of this year, as the country is recovering at a more rapid pace from the recession than the U.S.
Canada was not as severely affected by the economic crisis as other G-7 countries, as the nation’s financial system did not have to absorb the collapse of any of it major banks, and there was no disastrous mortgage crisis as Canada had stricter regulation in place.
Chief Economist of Royal Bank, Craig Wright said that the move by Canada is very modest, despite being the first G-7 country to make the leap. Other G-7 countries include the United States, the United Kingdom, France, Germany, Italy and Japan.
The Canadian dollar is largely unchanged on Tuesday against the U.S. dollar following the news having fallen fractionally.
The Bank of Canada increased its key interest rate to .50 percent, up a quarter of a point from .25 percent. The bank said that the European sovereign debt crisis has only caused limited fall in commodity prices.
"Thus far, the spill-over into Canada from events in Europe has been limited to a modest fall in commodity prices and some tightening of financial conditions," the bank said.
Canada said that it is maintaining its “considerable” monetary stimulus, despite the announced interest rate hike.
"Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments," the bank said in its interest-rate statement.
The move was expected by many economists following the 6.1 percent growth that the Canadian economy saw in the first three months of this year, as the country is recovering at a more rapid pace from the recession than the U.S.
Canada was not as severely affected by the economic crisis as other G-7 countries, as the nation’s financial system did not have to absorb the collapse of any of it major banks, and there was no disastrous mortgage crisis as Canada had stricter regulation in place.
Chief Economist of Royal Bank, Craig Wright said that the move by Canada is very modest, despite being the first G-7 country to make the leap. Other G-7 countries include the United States, the United Kingdom, France, Germany, Italy and Japan.
The Canadian dollar is largely unchanged on Tuesday against the U.S. dollar following the news having fallen fractionally.
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