As expected Bank of Canada raised its key interest rate to 0.75 percent, which is a 25-basis point increase. It is the first Bank of Canada increase in the overnight rate in seven years.
In its press release, the Bank of Canada has said that “the economic activity has grown strongly in recent quarters fuelled by household spending, and future adjustments to the target for the overnight rate will be guided by incoming data as they inform the bank’s inflation outlook, keeping in mind continued uncertainty and financial system vulnerabilities.”
Following suit, Canada’s five biggest financial institutions increased their prime interest rates yesterday.
RBC Royal Bank, TD Canada Trust, Bank of Montreal, Scotiabank and CIBC increased their prime lending rates by 25 basis points to 2.95 percent from 2.70 percent. The new rates will be effective July 13, 2017.
An increased prime rate affects many factors ranging from mortgage, loans and lines of credit. Since they are closely linked to the prime rate, the hit would be more on them than others. The effect won’t be immediate but the hikes would show their effects soon.