Bank of Canada has increased Prime 1/4%, making Prime rate 3.00%.

It could have gone either way but it was felt Canada’s economy was strong enough to warrant another tightening.

The Bank of Canada has therefore raised its overnight rate target to 1%, from just 0.25% three months ago.

To summarize the Bank’s written statement today:

• “…Consumption growth is expected to remain solid and business investment to rise strongly.”
• “The Bank now expects the economic recovery in Canada to be slightly more gradual than it had projected…”
• “…Financial conditions in Canada have tightened modestly but remain exceptionally stimulative.”
• “Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook.”

As a result of today’s increase, prime rate is 3.00%. It would be the first time prime has seen 3% since February 2009.

If you’ve got a variable payment mortgage, this hike will add about $13 to your monthly payment, for every $100,000 you owe.*

The next Bank of Canada interest rate meeting is October 19.

* Assumes a 25-year amortization, semi-annual compounding, and a prime rate increase of 25 basis points.