While investors are ramping up expectations for another rate increase by the Bank of Canada, the central bank's governor says there's no guarantee on timing.

"What we've got to do now is monitor how the economy responds to a higher rate of interest," Stephen Poloz told Omar Sachedina in an exclusive interview Wednesday with CTV News.

The Bank of Canada raised the target for its benchmark overnight lending rate 25 basis points on Wednesday to 0.75 per cent. It was the first time rates have gone up in this country since 2010.

The Canadian dollar surged by a full cent against the U.S. dollar as investors interpreted the bank's decision as a more upbeat economic outlook. The implied probability of another 25-basis-point rate increase at the bank's October meeting reached 48.5 per cent Thursday morning, compared with 37.3 per cent before the bank's decision.

"We should remember that the economy consists not just of people with mortgages, but also people with assets who, for a long time, have had really low interest rates. So it's a complicated process," Poloz said when asked if Canadians should expect another rate bump this year. "There's enough uncertainty around where the economy is relative to its potential — given the length of this downcycle — that we need to be very cautious and think through each time. There's no pre-determined path."

Wednesday's rate increase put an exclamation mark on the recent swing in messaging by Canada's central bank. As recently as last fall, the Bank of Canada was mulling another rate cut. By May, it said the economy had adjusted to the reality of lower oil prices. And in early June, the bank put investors on notice for higher rates.

"It's about pieces coming together," Poloz told CTV about the change in tune. "We of course came through the oil price shock. .. And as we were coming toward the end of that we had the U.S. election, which presented a whole new menu of possibilities."

"We had this sense of a pause potentially in our economic progress at that stage because of the uncertainty coming from U.S. policy changes. What has happened is that a combination of things — things that move more slowly on the U.S. front for various reasons — and so our sentiment indicators have all gone up. ... Secondly, the data have come in very much in line, a little stronger than what we'd been expecting all along."

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    Poloz acknowledged that one of the wild cards facing the Canadian economy is uncertainty about upcoming NAFTA negotiations with the United States and Mexico.

    “I care a great deal about [the risk of trade protectionism]. Trade is the lifeblood of the Canadian economy,” he said. “We need to know what’s going to happen to NAFTA one way or the other; the uncertainty is holding things back, not necessarily the details.”

    “Even though [business] investment is doing better now, it is doing less well than it would without that uncertainty. And that’s the main channel by which we think it’s affecting the economy for now. When it’s truly firing on all cylinders will be when every company can see clear daylight ahead.”

    The move away from ultra-cheap money in Canada comes at a crucial time for some of the country's most scrutinized housing markets.

    Low borrowing costs helped propel bubble fears in the Greater Toronto Area, prompting the provincial government to intervene in late April. Most recently, the average home price in the GTA fell nearly 14 per cent from the peak. On Wednesday, Poloz tried to assuage any concern that tighter lending conditions could precipitate a sharp drop in home prices.

    "We're [raising rates] in the context of a strong economy and more job creation; those things usually pump up the housing market," he said. "So a higher interest rate might take some of that pump-up out of the picture, but it doesn't necessarily turn it into a decline or a flat housing market."

    "In fact, I would expect the housing market to continue to grow, to contribute to GDP — but to contribute less to GDP growth than it has during the extraordinary period where it was doing most of the heavy lifting."