Highlights from the Bank of Canadas interest rate hike announcement

Today we raised our key policy rate by 25 basis points in the context of an economy that is approaching full capacity and with inflation expected to reach the 2 per cent target within the next year. So I think the most important thing here is that, the economy clearly no longer needs as much stimulus as we've been giving it but at the same time we're letting you know that the world has changed enough in recent years, in particular indebtedness of households and so on, that the economy may behave slightly differently compared to the average behaviour over time i.e., what's in our models and so we'll be monitoring carefully how the economy continues to adjust, both the fundamentals and to higher interest rates. Well, on the investment side I think the best we can do right now is take into account the confidence effects that you've just talked about and also keep in mind that other than that firms across Canada seem to be more inclined to invest this year. Our assessment is that the economy is, well, can handle very well, this move we have today and of course you need to preface that with an acknowledgement that of course interest rates are still very low. The important thing here is this is good news for Canada. The accumulation of evidence and the growth and our confidence that the economy is on a solid trajectory. This should be good news for everybody. I know not everybody will think a higher interest rate is good news, but it's a symptom of an improving economy.

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