The Bank of Canada has increased its key interest rate by a quarter-point to 1.5 per cent in a move that was widely expected.
The rate is what banks pay for short-term loans, which affects what consumers pay for things like mortgages, lines of credit and savings accounts.
The bank said in a statement there are good signs for the economy, with a stabilizing housing market, higher oil prices and businesses spending more.
But it is watching what happens in trade tensions with the United States, that it predicts will cut nearly 0.7 per cent from economic growth by the end of 2020.
This is the first rate hike in six months and the fourth since last summer.
The Bank of Canada’s quarterly update predicts the economy will show growth in 2019 and 2020, a better outlook than what was forecast in April.
Another decision on interest rates is expected in September.
The central bank says higher rates will be necessary to keep inflation near its target but intends to go with a gradual, data-dependent approach.
With files from CBC and the Canadian Press.