Bank of Canada Raises Key Interest Rate To 1.50%

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As expected, the Bank of Canada raised its key lending rate on Wednesday, to 1.5 per cent, the fourth rate hike in roughly the past year.

Poloz recently said the impacts of the U.S.

The Canadian dollar weakened to a more than one-week low against its US counterpart on Wednesday as broad-based gains for the greenback offset an interest rate hike by the Bank of Canada and the prospect of further monetary policy tightening.

Governing Council expects that higher interest rates will be warranted to keep inflation near target and will continue to take a gradual approach, guided by incoming data.

"The escalation of trade actions was quite a part of our discussions, but we agreed very early on that it was not going to be the basis for our decision", Poloz told a news conference.

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The Bank Rate is correspondingly 1 ¾ per cent and the deposit rate is 1 ¼ per cent. -Canada trade dispute would figure prominently in the bank's decision-making process for today's rate announcement. The tariff fight, the bank estimated, will shave almost 0.7% from Canada's economic growth by the end of 2020.

The Bank said Canada's economy is operating "close to capacity", implying that it expects to see inflation rise in the future.

The Bank of Canada also has its eye on how widening global trade disputes, including an intensifying battle between the USA and China, will affect the world's economy. Temporary factors are causing volatility in quarterly growth rates: the Bank projects a pick-up to 2.8 per cent in the second quarter and a moderation to 1.5 per cent in the third.

The bank, however, noted in its report that despite "healthy" labour market conditions, employment growth and average hours worked have slowed down compared to last year's surge.

Canadian government bond prices were mostly lower across a flatter yield curve, with the two-year down 4 cents to yield 1.959 per cent and the 10-year falling 5 cents to yield 2.156 per cent.

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