The Bank of Canada raised its benchmark policy rate Tuesday to 0.75% even though it scaled back its growth outlook on the belief budget cutting among households and governments in advanced economies is expected to “temper” the pace of the global recovery.
Plus, the bank pushed back the date at which it expects the Canadian economy to close its output gap — to the end of next year from mid-2011. Still, it opted for a rate hike as the “underlying dynamics” for inflation are little changed, with both headline and core inflation expected to remain near the bank’s preferred 2% target up until the end of 2012.
The central bank’s benchmark rate now stands at 0.75%, an increase of 25 basis points, and marks the second straight rate hike. The Bank of Canada remains the only central bank among its Group of Seven peers to raise rates following the recession.
Read the Announcement.