Bank Rate Raised to 5 Per Cent

The Bank of Canada today raised its Bank Rate by ½ of one percentage point to 5 per cent. The Bank's operating band for the overnight rate was similarly adjusted to a range of 4½ to 5 per cent.

Downward pressure on the exchange rate for the Canadian dollar has intensified in recent days, leaving the dollar at levels inconsistent with the underlying trends of the Canadian economy. Although problems in Asia are likely to moderate the pace of economic activity in 1998, the outlook is still for solid expansion in output and employment that will continue to reduce the slack in the Canadian economy. In these circumstances, the extent of the significant further easing of monetary conditions due to the recent decline in the Canadian dollar is not appropriate. This adjustment in the Bank Rate is designed to rebalance monetary conditions and provide support for the Canadian dollar.