Bank of Canada raises interest rate to one per cent

OTTAWA - The Bank of Canada has raised the trend-setting interest rate a quarter point to one per cent.

It's the third hike in three months, taking the overnight rate up in stages from the rock-bottom 0.25 per cent that was set by the central bank during the recession to help stimulate the economy.

Most economists had expected bank governor Mark Carney to lift the rate, which affects loans tied to the prime rate such as variable-rate mortgages and some lines of credit.

But some were skeptical a hike is the best option, since the economic recovery has not been as strong as originally hoped and there are clear signs of weakness in Canada's biggest trading partner, the United States.

Although growth has slowed, Canada's economy has continued to improve and at one per cent, the policy rate is still below inflation.