Investing.com - The Bank of Canada hiked interest rates on Wednesday for the first time in nearly seven years, making it the first major central bank to follow the Federal Reserve in tightening monetary policy.
The BoC raised the cash rate to 0.75% in a widely anticipated decision. It also raised the bank rate to 1% and the deposit rate to 0.5%.
In a statement, the bank said growth is strengthening across the economy and becoming more sustainable.
"Recent data have bolstered the bank’s confidence in its outlook for above-potential growth and the absorption of excess capacity in the economy."
The bank acknowledged recent softness in inflation, but said the factors behind it appear to be mostly temporary and noted that the adjustment to lower oil prices is largely complete.
The rate increase was the first under Governor Stephen Poloz, who took over at the helm of the bank in 2013 after his predecessor Mark Carney went to the Bank of England.
Expectations for a rate hike had been rising since senior BoC officials said last month that a pair of rate cuts in 2015 had done their job in cushioning the economy from the steep fall in oil prices.
The bank has kept rates unchanged since the two rate cuts in 2015 and the prolonged period of low borrowing costs has been blamed for helping inflate the housing market, particularly in Toronto, Canada's largest city.