"Risk aversion be damned. Like an understudy seizing her moment, Canada's central bank on Tuesday stepped forward to raise its target lending rate by a quarter percentage point to 0.5%.
In doing so, Canada not only became the first Group of Seven nation to raise interest rates, but also did so at a time when many peers probably wish they could lower theirs even further.
The Canadian economy's performance has certainly been impressive, growing at an average 5.5% annualized pace over the past two quarters. The unemployment rate has dropped from 8.7% last summer to 8.1% in April, near its 7.5% average of the past 15 years, according to Capital Economics. And consumer prices are running about 2% higher than a year ago, in the middle of the Bank of Canada's 1% to 3% target range.
Contrast that with the U.S., where unemployment is near 10% and inflation is falling toward zero. That, apparently, is what avoiding a real-estate bubble can do for you. Canada's move shows that policy makers there, as in China, are trying to learn from that lesson. To such a degree, in fact, that they were willing to tighten even as global financial markets tumble and the price of oil, the country's key export, has dived as much as 20% since early April.
Who says central bankers are spineless?"
from The Wall Street Journal