Rate hike: a good sign for Canadian economy

Last Tuesday, the Bank of Canada has hiked its key interest rate by 25 basis points to 0.50%. This rate hike comes right after Statistics Canada reported a robust 6.1% GDP, the strongest quarterly performance in over a decade. The strong consumer spending and the rebuilding of businesses has benefited the economy and has thus produced a stellar GDP expansion.

But what does the rate hike mean? For a lot of experts, the BoC rate hike is a good sign for the Canadian economy. Experts believe that the rate hike means that the BoC is confident that the Canadian economy is well on its way to a full recovery from the latest recession. Moreover, the rate hike, experts say, somewhat reassures investors and the public that Canada is in a far better position than other G-7 countries. According to an article on www.advisor.ca, “a shallow recession and a speedy recovery from it are factors attributed to Canada being the only country in the G-7 to announce a rate hike.”

There is, however, some concern over the uncertainty in the economy given the financial crisis in Europe. With this concern looming over our heads, the BoC has stated that further rate hikes will be weighed carefully against global and domestic developments.