The Bank of Canada on Wednesday, 11 July, raised the benchmark interest rate to the country’s economy is projected to remain sustainable even if we face even greater threats caused trade tensions.
This increase in the interest rate of the Central Bank became the first six months, she rose from 1.25% to 1.5%. In addition, it is the fourth increase in the last 12 months. For the first time the rate reached such a high level since December 2008.
Such a decision is likely to encourage all the major banks of Canada to raise its reference rate. Largely, it is due to the ongoing trade dispute between Canada and the United States, which is expected to be detrimental to both countries.
“Although some industries and their workers will be difficult to correct the situation, it is expected that Canada imposed countermeasures against the United States will make an impact on the economic development and inflation of Canada is negligible,” − said in a statement the Bank.
But in addition to the imposed tariffs on imports of steel and aluminum Canada could face another unknown variable for the trade, which, many believe, will cause much greater damage to the economy: we are talking about the duties of the United States in the automotive sector.
USA rates applicable to United cross-border supply chains in the automotive sector, will have a “huge impact on investment and employment,” warned the Bank of Canada, in its accompanying report on monetary policy.