Canada becomes first G7 nation to raise interest rates
The Bank of Canada has today elected to raise interest rates by one quarter of a percentage point to 0.5%, as widely expected.
As a result, Canada has become the first G7 central bank to raise rates since the onset of the recession.
Yesterday, it emerged that the Canadian economy expanded by an annualised 6.1% in the first three months of 2010.
The figure was slightly better than the 6% analysts had expected and comes after a 4.9% expansion in the final three months of 2009.
The strong growth led economists to believe that the Bank of Canada would raise interest rates at its meeting today.
In a statement, the Bank said: “Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.”
Canada has much stricter mortgage sector rules than in the USA and, as a result, has been protected from the worst of the global financial crisis, because its banks were much less exposed and therefore emerged unscathed from the credit crisis.
Furthermore, Canada’s economy only entered a mild recession last year and its unemployment rate actually fell in April to 8.1%, from 8.2% in March.
The other members of the G7 group of industrialised nations are the US, UK, France, Germany, Italy and Japan.