The nation's largest lenders have responded to the surprise move
Canada’s top six banks have announced an increase in their prime lending rates in response to the Bank of Canada's unexpected benchmark interest rate hike on June 7.
Royal Bank of Canada, TD Canada Trust, Canadian Imperial Bank of Commerce (CIBC), Bank of Montreal, National Bank of Canada, and Bank of Nova Scotia have all stated that they will raise the prime rate by 25 basis points from 6.70% to 6.95%.
Desjardins Group and Equitable Bank have also confirmed implementing the same increase.
The Bank of Canada's decision to raise its benchmark policy rate to 4.75% earlier caught markets and observers off guard.
This move marks the ninth rate increase since March 2022, with a cumulative rise of 4.5 percentage points. As a result, the commercial banks' prime rate has moved in tandem, increasing from 2.7% to 6.95%.
The banks' decision to adjust their prime lending rates reflects their need to align with the central bank's new benchmark rate. This increase will have an impact on borrowers, particularly those with variable-rate loans tied to the prime rate.
While the rate hike may be seen as a reflection of the Bank of Canada's confidence in the economy, it also raises concerns about the potential impact on consumer borrowing costs and economic growth.
The increase in lending rates could make borrowing more expensive for individuals and businesses, potentially affecting spending and investment decisions.
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