On Wednesday, Canada became the first Group of Seven country to join the United States in raising interest rates. The central bank’s bench rate increased from 0.5 percent to 0.75 percent.
Canada is among one of its strongest growth spurts since the 2008-2009 recession with the expansion increasing to an above 3 percent pace of the past 4 quarters. This marks the fastest among Group of Seven countries and is double of what the central bank considers Canada’s capacity to grow without inflation. Growth has definitely been accelerating and is reaching to more and more sectors and regions increasing their confidence that the economy will continue to grow above potential.
By the end of 2017, the central bank estimates that the economy will return to full capacity. They also predict that inflation will return close to its target of 2 percent by the middle of next year. This better than expected growth is being largely driven by household spending which contributes to 1.9 percent of growth rate and housing activity is definitely expected to ease up in the next couple of months.