Interest rates

Wednesday July 12, 2017

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.

July 16, 2015

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.

May 13, 2010

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) 

 

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Thursday July 16, 2015

Thursday July 16, 2015Editorial cartoon by Graeme MacKay, The Hamilton Spectator – Thursday July 16, 2015

Bank of Canada cuts interest rate, lowers economic outlook

The Bank of Canada reduced its benchmark interest rate for a second time this year as the damage from lower oil prices shrank the economy in the first half and leaves a full recovery almost two years away.

Gross domestic product probably “contracted modestly” in the first half of 2015, policy makers said, without calling it a recession, which is typically defined as two straight quarters of negative growth. Output will recover this quarter as non-energy exports rebound from a decline the bank called “puzzling.”

The central bank lowered the benchmark rate on overnight loans between commercial banks to 0.5 per cent from 0.75 per cent, where it had been since a cut in January. The first-half contraction led to a “marked increase in excess capacity,” the bank
said.

Policy makers at the bank said output probably shrank at a 0.5 per cent annualized pace in the second quarter, compared with an April prediction of a 1.8 per cent expansion. The economy registered a 0.6 per cent contraction between January and March.

Historically low interest rates have already pushed consumer debt-loads and home prices to record highs, while failing to trigger lasting investment and export gains.

For the housing market, where the cheapest mortgages in decades have led to record consumer debt burdens, the bank reiterated its view there’s no bubble. “The Bank continues to anticipate a constructive evolution in the housing market,” its economic forecast paper said, with a moderation in housing in 2015, followed by stabilization in 2016 and 2017.  (Source: Hamilton Spectator)