The Bank of Canada Keeps up with Economic Boosts

The Bank of Canada continues to increase interest rates for the second time in less than two months as the country adjusts to maintain positive economic momentum. One of the country’s major banks RBC (Royal Bank of Canada) was first to raise their standard rates from 2.95 per cent to 3.2 percent and others followed suit with the financial jump.

Interest rates started increasing last July as the benchmark 0.5% hiked to 0.75%, its first change in nearly seven years and again on Wednesday without a predetermined end decision for the rest of the year.

Canada’s Economic Surge

The country showed promising comeback with its economic growth as the latest data exceeds the Bank of Canada’s expectation for this year.

"Canada's economy is on track to post its strongest gain in three years,” stated Craig Wright, senior vice-president and chief economist at RBC, but not disregarding the possible effect of the pending renegotiation of NAFTA or the expected changes within the housing market.

The weak growth in the past two years has proven to be slow-paced, with a GDP of 1.1% in 2015 and an overall growth forecast that was only at 1.2% in the corresponding year. A weak loonie and oil prices plunging had been some of the reasons for the decline, where oil is known to be one of Canada’s major exports.

 Canada made an unexpected rebound where analysts try to pinpoint the reasons for its low-key improvement. Business investments have been largely responsible for the economic recovery in the first quarter of the year and with the steady wage growth leading to strong consumer spending, the country thrived in it its second quarter.

Maintaining Economic Momentum

Considering factors for predicting future projections, CIBC Senior Economist Andrew Grantham, released a research note to clients expecting Poloz to observe whether the U.S. Federal Reserve will increase interest rates in December before coming to a conclusive move. “If the economy cools down from its current blistering pace as we expect in (the third quarter), the Bank of Canada will have reason to take a slower approach in rate hikes,” he wrote.

The pioneer influences for Canada’s economic growth this year will still play major roles for the rest of the year. The bank of Canada is anticipating additional exports for the last quarter and a rise in business investments to help with the steady progress of the economy.

Although consumer spending will still be a contributing aspect, the bank is still concerned that as high levels of household debt and a slowdown in the housing market weighs in, it eventually lead to a cutback in its blazing pace.