It could have gone either way but Mark Carney and co. felt Canada’s economy was hot enough to warrant another tightening.
Here’s the gist of the Bank’s written statement today:
- “…Consumption growth is expected to remain solid and business investment to rise strongly.”
- “The Bank now expects the economic recovery in Canada to be slightly more gradual than it had projected…”
- “…Financial conditions in Canada have tightened modestly but remain exceptionally stimulative.”
- “Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook.”
As a result of today’s increase, prime rate will likely climb to 3.00% this week. It would be the first time prime has seen 3% since February 2009.
If you’ve got a variable payment mortgage, this hike will add about $13 to your monthly payment, for every $100,000 you owe.*
The next BoC interest rate meeting is October 19.
* Assumes a 25-year amortization, semi-annual compounding, and a prime rate increase of 25 basis points.
Source: Canadian Mortgage Trends