As economy improves, signs point to potential rate hike

OTTAWA The Bank of Canada sent out more signals Tuesday that it’s moving closer to an interest-rate hike as the economy continues to strengthen.

Governor Stephen Poloz told the CBC in an interview broadcast Tuesday that rate cuts by the bank amid the oil-price slump have largely accomplished their goal of helping the economy.

The bank reduced its trendsetting rate twice in 2015 to the very low level of 0.5 per cent to help offset the effects of the oilprice shock. But following an encouraging run in recent months for several economic indicators, the Bank of Canada appears to be preparing for its first increase in nearly seven years.

“The economy is gathering momentum and not just in certain spots, but across a much-wider array,” Poloz said in Winnipeg.

“It isn’t time to throw a party, but it does suggest that the interest rate cuts we did two years ago have done their job, and that’s important to us.”

Poloz’s remarks came a day after the bank’s second-highest ranking official indicated the governing council was assessing whether the current, considerable level of stimulus provided by rock-bottom rates is still required.

In what was widely viewed as a highly positive or “hawkish” speech Monday, senior deputy governor Carolyn Wilkins said the economy had registered broadbased gains in recent months not seen since before the oil-price collapse.

Poloz echoed Wilkins’ optimism Tuesday.

“We’re encouraged by the data and so people need to be thinking about what their finances would look like were interest rates to be a little higher when they renew their mortgage,” he said.