Canada increases interest rates to 0.5%

Image caption,
The Bank said it remained cautious about the global economy

Canada has become the first member of the G7 group of industrialised nations to raise interest rates since the global financial crisis.

The Bank of Canada has increased its key lending rate by one quarter of a percentage point to 0.5%.

The increase comes after the Canadian economy has grown strongly since the start of the year.

Official figures showed that its economy grew at an annual rate of 6.1% in the first three months of the year.

This followed an annual growth rate of 5% during the last quarter of 2009.

Canada has been shielded from the worst of the global financial crisis, because its banks were much less exposed.

As a result, no major Canadian lender has needed to be bailed out by Canada's government.

Canada also has much stricter mortgage sector rules than in the US, where sub-prime lending - offering mortgages to low income or high risk households - sparked the financial crisis.

Looking ahead, the Canadian central bank said global economic risks remained.

It said it was cautious about "the possibility of renewed weakness in Europe" and an "increasingly uneven" worldwide economic recovery.

The other members of the G7 are the US, UK, France, Germany, Italy and Japan.

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