Published: Fri, July 13, 2018
Finance | By Claude Patterson

More rate hikes on way?

More rate hikes on way?

The Royal Bank of Canada said Wednesday it will increase its prime rate by a quarter of a percentage point to 3.70 per cent, effective Thursday.

The rates had previously been set at 3.45 per cent.

But Mortgages of Canada CEO Samantha Brookes says those with variable-rate mortgages will now face higher interest payments, a concern for many Canadian households that are already saddled with hefty debt loads.

Citing a prudent, data-dependent approach, Poloz hasn't touched the rate since he increased it in January, a move that followed increases past year in September and July.

The Bank of Canada says persistent trade uncertainty and Canada's tariff fight with the United States will shave almost 0.7 per cent from economic growth by the end of 2020 - but it predicts the blow to be largely offset by the positive impact of higher oil prices.

"Although there will be hard adjustments for some industries and their workers, the effect of these measures on Canadian growth and inflation is expected to be modest", the bank said in a statement.

The July projection also incorporates the estimated impact of tariffs on steel and aluminum recently imposed by the United States, as well as the countermeasures enacted by Canada.

The Bank said Canada's economy is operating "close to capacity", implying that it expects to see inflation rise in the future.

Outside the country, the Bank of Canada has its eye on how widening global trade disputes, including an intensifying battle between the US and China, will affect the world's economy.

The Bank of Canada will also release its updated economic projections today in its latest edition of its quarterly monetary policy report.

Economists anticipate several more hikes this year and in 2019. The Bank estimates that underlying wage growth is running at about 2.3 per cent, slower than would be expected in a labour market with no slack.

Another decision on interest rates is expected in September. It's expected to settle back down to two per cent in the second half of 2019.

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