Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Wednesday July 12, 2017
Bank of Canada may hike interest rate for 1st time in 7 years
After almost a decade of warnings that never came to pass, it appears as though the Bank of Canada is ramping up to hike its benchmark interest rate — possibly as soon as next week.
On July 12, Canada’s central bank will announce its latest decision on where to place its trend-setting interest rate, which has an impact on the rates that Canadian borrowers and savers get for their bank accounts, mortgages and other products.
Eight times a year, the bank’s board of governors meets to assess the latest economic indicators and decide whether Canada’s economy needs a shot in the arm from a rate cut, or a pump of the brakes by way of a hike.
And for the first time in 54 such meetings, it’s looking like the latter is in order.
It’s not like there haven’t been warning signs. By the time Stephen Poloz was named to replace Mark Carney atop the bank in 2013, the central bank had already been on the sidelines for more than two years, its benchmark interest rate set at one per cent.
But even as the bank kept loans cheap coming out of the financial crisis, the messaging from the top came early and often that Canadians should be forewarned — rates have to go up eventually.
As far back as 2014 Poloz warned Canadians that rates would rise “soon” — before oil’s plunge in 2015 caused the bank to lose its nerve. Instead, the central bank moved in the opposite direction, cutting rates twice that year to bring its rate to 0.5 per cent, where it currently sits.
At the time, those hikes were described as a temporary measure to help a Canadian economy that had been waylaid by an oil price that lost more than 70 per cent of its value in a matter of months. But in recent weeks the bank has started leaving clear signals that despite oil still being in the $40-per-barrel range, those temporary conditions are over and it’s time for a return to normalcy. (Source: CBC News)