The MrRental Blog Archives

Bank of Canada raises rates

by Jes Herman June 2nd, 2010

Well it finally happened, the Bank of Canada raised their overnight rate by 0.25% to their target of 0.50%. Since last year the BoC has said that they will increase rates in Q2 of 2010, and as a result Canada is the first of the G7 countries to increase their rates.

The global economic recovery is proceeding but is increasingly uneven across countries, with strong momentum in emerging market economies, some consolidation of the recovery in the United States, Japan and other industrialized economies, and the possibility of renewed weakness in Europe. The required rebalancing of global growth has not yet materialized.

In most advanced economies, the recovery remains heavily dependent on monetary and fiscal stimulus. In general, broad forces of household, bank, and sovereign deleveraging will add to the variability, and temper the pace, of global growth. Recent tensions in Europe are likely to result in higher borrowing costs and more rapid tightening of fiscal policy in some countries – an important downside risk identified in the April Monetary Policy Report (MPR). Thus far, the spillover into Canada from events in Europe has been limited to a modest fall in commodity prices and some tightening of financial conditions.

Activity in Canada is unfolding largely as expected. The economy grew by a robust 6.1 per cent in the first quarter, led by housing and consumer spending. Employment growth has resumed. Going forward, household spending is expected to decelerate to a pace more consistent with income growth. The anticipated pickup in business investment will be important for a more balanced recovery.

To read more check out the BoC website

We know that they are concerned about Europe so it will be interesting to see what they do when they next meet in July. They are expected to raise the rates again this year so we’ll have to see how the Europe situation plays out over the next little while.

But don’t let this news hold you down. Interest rates are still astronomically low, there are always deals out there, and the higher interest rates go the less competition there is in the purchasing market. Furthermore interest rate increases will strengthen the rental market. Despite this positive outlook don’t allow yourself get over-extended. That’s how you get into trouble.

Comments Off |