Canada Bids Farewell to Ultralow Rates

| About: CurrencyShares Canadian (FXC)

By David Berman

The Bank of Canada raised its key lending rate on Tuesday morning to 0.5% from 0.25%, in a move that was widely anticipated by economists several months ago after Canada began to post impressive economic growth.

"Activity in Canada is unfolding largely as expected," the bank said in its statement. "The economy grew by a robust 6.1% in the first quarter, led by housing and consumer spending. Employment growth has resumed."

In making its decision, the bank took events in Europe - where a debt crisis continues to unfold - into consideration. "Thus far, the spillover into Canada from events in Europe has been limited to a modest fall in commodity prices and some tightening of financial conditions," the bank said in its statement.

However, the Bank of Canada did acknowledge that the global economic backdrop is anything but stable, suggesting that future rate increases are not assured.

"Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments," the bank said.