Canada's major banks raised their prime lending rates 25 basis points
Tuesday in the wake of the Bank of Canada's decision to hike its
benchmark interest rate to 0.5%.
RBC Royal Bank and TD Bank Financial group were first to bump up
their prime lending rates to 2.50% Tuesday.
They were followed by Bank of Montreal, CIBC, National Bank
Financial Group, Laurentian Bank and Desjardins group.
Meanwhile, earlier Tuesday the Bank of Montreal actually lowered
its five-year fixed rate mortgage by 10 basis points to 4.25%, a move
geared at house hunters who are worried they have missed the boat on a
low-interest borrowing environment.
The prime rate is generally the base interest rate from which
other rates for lending are derived, such as for mortgages, loans or
credit cards.
The rate changes made by Canada's major banks are generally made
in close concert with each other and with the Bank of Canada.
Canada's central bank raised its benchmark interest rate for the
first time since the middle of 2007 Tuesday morning, a move that had
been long predicted by economists and seemingly confirmed by robust GDP
growth numbers reported a day earlier.
The Bank had previously said it would maintain rates until at
least the summer of 2010.
However, comments made by Governor Mark Carney Tuesday cautioned
Canadians not to necessarily expect a succession of rate increases in
coming months either, as the country continues to navigate through a
delicate recovery while keeping an eye on a rising loonie.
Nonetheless, Canada's primary securities dealers largely stood by
their interest rate forecasts for the rest of the year on Tuesday,
expecting the Bank of Canada to build on its first rate hike in three
years.
The central bank said there was "considerable uncertainty"
regarding the outlook, making its next move highly unpredictable in
light of developments in Europe. Still, all but one of Canada's 12
dealers, surveyed by Reuters, forecast the central bank would raise
interest rates in July. Eleven of 12 also forecast rates would rise
by 25 basis points in each of September and October.
Four different dealers expect at least one pause in rate hikes
sometime in the balance of this year. Year-end interest rate forecasts
ranged between 1.00% and 1.5%.
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