Bank Rate Raised 1/4 of a Percentage Point
The Bank of Canada indicated today that it had raised the Bank Rate by 1/4 of one percentage point to 3 1/2 per cent. The operating band for the overnight interest rate has consequently been raised by the same amount to 3 - 3 1/2 per cent.
In its May Monetary Policy Report, the Bank indicated that monetary conditions were highly stimulative and that any possible need for further easing had largely disappeared. Recent economic information has reinforced that view. However, since May, persistent weakness in the Canadian dollar against the U.S. dollar and other major currencies has in fact resulted in further ease. This increase in the Bank Rate is designed to counter excessive easing in monetary conditions and to provide support for the currency.