Bank of Canada hikes key interest rate to 1.25%

The Bank of Canada raised its key interest rate from a record low today, the first Group of Seven country to do so since last year’s global recession. The Bank of Canada photographed in Ottawa, Ontario, Canada, Tuesday, June 1, 2010. Photographer: Patrick Doyle/Bloomberg News.

The Bank of Canada has raised its key lending rate by a quarter percentage point to 1.25 % today, the third time it has moved its benchmark rate from once-record lows last summer.

The bank’s rate has an impact on rates that Canadians get from retail banks for things like mortgages, savings accounts and GICs. The move means borrowers can expect to pay more, but savers can expect to earn more, too.

Officials at the bank will give more details on their thinking at a news conference in Ottawa at 11:15 a.m. ET.

The bank was widely expected to raise its key rate after economic data in recent months showed gross domestic product growing, the job market healthy and the cost of living ticking higher.While broadly positive about the economy’s prospects, the bank cited “uncertainty about the future of NAFTA” as a reason for concern moving forward.

While the rate hike was expected, some of the bank’s concerns came as a negative surprise to currency investors, who sold off the loonie after the rate decision came out. Shortly after the announcement, the loonie was changing hands at just over 80 cents US, off about a half a cent from where it was before the announcement.