Big banks hike their prime rates to 6.45%

Royal Bank of Canada was the first of big banks to announce its increasing its prime lending rate following the Bank of Canada’s interest rate hike.

RBC, Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Toronto Dominion Bank will raise their prime rates by half a percentage point to 6.45 per cent, from 5.95 per cent, effective Thursday.

This comes after the Bank of Canada increased its policy rate by 50 basis points to 4.25 per cent on Wednesday, the highest rate since the beginning of 2008.  The move was in line with average economist estimates tracked by Bloomberg.

It was the seventh rate hike this year as the central bank works to tamp down inflation not seen in Canada since the 1980s.  The Bank of Canada wants to see inflation around 2 per cent, however, the most-recent reading had it at 6.9 per cent in October. Core inflation, which strips out volatile food and energy prices, was 5.3 per cent.