Investing.com – The Bank of Canada (BoC) decided on Wednesday to raise its benchmark interest rate.
As expected, the BoC said it was increasing its overnight cash rate by 25 basis points to 1.25%.
The Canadian monetary authority also noted that the Bank Rate is correspondingly 1.5% and the deposit rate is 1%.
“Recent data have been strong, inflation is close to target, and the economy is operating roughly at capacity,” the BOC said in the statement.
“However, uncertainty surrounding the future of the North American Free Trade Agreement (NAFTA) is clouding the economic outlook,” the Bank of Canada warned.
Furthermore, the BoC gave an upbeat outlook of the global economy, forecasting growth of 3.5% on average and indicated that there were particularly signs of increasing momentum in the U.S. economy which it expects to be boosted by the recent U.S. tax reform.
“While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target,” the BoC concluded.
BoC governor Stephen Poloz will comment on the decision at a press conference at 11:15AM ET (16:15GMT).
Following the press release, the loonie strengthened. USD/CAD was trading at 1.2483 from around 1.2412 ahead of the announcement, while EUR/CAD moved at 1.5261, compared to 1.5169 prior to the news.