The U.S. Federal Reserve raised interest rates Wednesday for the first time in a decade, a move that sent the Canadian dollar lower, underscoring the widening gap between a strengthening U.S. economy and our lacklustre growth.

The U.S. central bank inched interest rates a quarter-point higher to the 0.25 per cent to the 0.5 per cent range. It was the first rate hike since 2006.

Wednesday’s rate hike was long telegraphed and came amid signs the U.S. economy will keep improving.

The move puts the U.S. overnight lending rate on par with Canada’s 0.5 per cent, but the improved return on U.S. investments sent the U.S. dollar higher against other currencies. That included our dollar which has already fallen 15 per cent against the U.S. dollar this year. The loonie closed at 72.54 cents U.S. One American dollar costs $1.3785.

“It’s at an 11-year low and as the greenback strengthens, it’s definitely going to get weaker,” said Penelope Graham, editor of Ratesupermarket.ca.

Also read: Why a U.S. rate hike is good for us

That makes travelling or shopping in the U.S. more expensive, but domestic goods cheaper to import.

Canadians with fixed-rate mortgages could see their rates rise because they are set by the bond market, which is suddenly less attractive for investors.

“Historically, they have ticked higher in the aftermath of an announcement like this,” Graham said.

The generally upbeat tone of the announcement was a sign central bank thinks the economy can finally withstand a rate hike.

“The U.S. economy has shown considerable strength,” said Federal Reserve chair Janet Yellen. “We decided to move because we feel the conditions - further improvement in the labour market and reasonable confidence that inflation would move back to two per cent in the long term - have been satisfied.”

The Fed cited stronger household spending and business investment as well as improvements in the housing sector and declining unemployment.

However, the central bank also warned the economy is delicate and net exports remain soft amid a weak global economy and strong greenback, which makes U.S. made goods more expensive to import. It expects “gradual increases” in the overnight rate and said rises could move slower if the economy disappoints.

The modest rate hike ends an era of nearly-free money for consumers and the Federal government and some U.S. banks raised their prime lending rates in response. But the still very-low rate is not expected to result in consumers or businesses clamping down on borrowing.

The U.S. rate hike also highlighted a divergence between the Canadian and U.S. economies and monetary policies, as the Bank of Canada historically follows the Fed’s trend.

The last time Canadians heard from Bank of Canada governor Stephen Poloz, he talked about the potential of lowering interest rates below zero per cent in the event of a crisis, but insisted the bank has no plans to do that.

When the financial crisis hit in 2008, sending the U.S. economy into a free fall, the Fed lowered rates to the zero to 0.25 per cent range in the hopes cheap money would stimulate spending.

Canada followed with record lows in 2009, which bounced as high as one per cent in 2010 when it appeared the economy was on strong footing, but have since been cut to 0.5 per cent.

“Just as Canada hiked rates in 2010 when the U.S. was still on hold, we can and likely will have a policy divergence now,” said CIBC chief economist Avery Shenfeld.

“We’re now much more in need of low interest rates to support growth, given our greater exposure to oil and other beaten up resources.”

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Most economists believe Canada’s central bank is in no rush to raise interest rates even if the Fed continues to hike, given the weakness of the economy, which slipped into recession in the first part of this year.

In the U.S., the unemployment rate has fallen to half its recessionary peak and now sits at five per cent, the level considered to be full employment. By contrast, Canada’s unemployment rate is 7.1 per cent.

The OECD expects 2015 GDP growth of 1.2 per cent for Canada, just half of the 2.5 per cent it expects in the U.S. It projects growth will rise in 2016 to 2 per cent in Canada and 2.5 per cent in the U.S.