Governor Stephen Poloz said that while it was not easy for policymakers to set aside "all the talk" about trade, the bank hiked rates amid increasing confidence in its outlook, with Canada's economy firing on all cylinders despite the tensions.
The Bank of Canada is widely expected to raise its trend-setting interest rate today for the first time in six months.
Poloz recently said the impacts of the U.S.
The central bank increased its benchmark interest rate to 1.5 per cent, up from 1.25 per cent, marking the fourth increase over the last 12 months.
The bank's relatively sanguine view of the trade risk boosted the Canadian dollar to its strongest in almost four weeks, and economists said they expected the central bank to hike again by year end.
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However, the negative blow of the trade policies recently put in place are to be largely offset by the positives for Canada from higher oil prices, which are above US$73 per barrel, and the stronger USA economy, the bank said.
"It's evident to us that higher interest rates will be warranted, but of course we're not in a position to say exactly how much higher or at what rate we might get there", Poloz told a news conference Wednesday in Ottawa. The bank had been criticized for a surprise rate hike last September. "Temporary factors are causing volatility in quarterly growth rates: the bank projects a pick-up to 2.8% in the second quarter and a moderation to 1.5% in the third".
It means consumers with variable rate mortgages or upcoming mortgage renewals will have to pay more.
The central bank says Canadian growth will continue to see bigger contributions from exports and business investment, while it expects household spending to represent a smaller share due to the dampening effects of higher interest rates and stricter mortgage rules.
"My experience having come from Ireland five years ago is I've experienced recession and I've experienced interest hikes before so I'm cautious at this stage", said van Dijk.