The Bank of Canada felt worried enough about the Canadian (and North American in general) economy’s fragile recovery that they decided to stop raising interest rates for now, keeping their key overnight rate at 1%, which is good for those in debt, and bad for those who are saving in GIC’s and bank accounts (and CSB’s I suppose too).
A telling statement by the Money Mavens at B of C is:
These factors will contribute to a weaker-than-projected recovery in the United States in particular. Growth in emerging-market economies is expected to ease to a more sustainable pace as fiscal and monetary policies are tightened. Heightened tensions in currency markets and related risks associated with global imbalances could result in a more protracted and difficult global recovery.
Interesting, so this recovery we are kind of living in, may not be that vigorous, or worse, sustainable? Not surprising given how much “stimulus” got pumped into the world’s economies, we were bound to have one heck of a hangover when all that stopped, and this seems to be happening now.
The implication in the statement is that as long as inflation stays relatively in check, keeping interest rates low may stay in place as a stimulus policy for a while, however, we now also see that Gas prices have started jumping up, which will have many ripple effects for the economy.
Can the Bank of Canada afford to raise interest rates? I don’t really know, but my personal plans are to continue to pay down the debt that I have for now, enjoying the power these low interest rates are giving my payments (in terms of principle pay down), and hope the rates can stay lower for longer. I am attempting not to incur any more debt (for now), as I think I have enough in my life currently.
If you were looking to buy a house, now might be the time to do it, given the slowing of the market and the low rates out there for fixed long term mortgages, might not be a better time (if you can afford it).
These factors will contribute to a weaker-than-projected recovery in the United States in particular. this is useful information for anyone willing to learn something new everyday.
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shane ping
Great, now I can plan for the much awaited new house purchase, wes waiting for this announcement only.
Sounds like a good plan BCM; paying down debt. I guess that’s an approach that never goes out of style you could say.
As you might know from my blog, we just bought a house and plan to move in, in a couple of months. Kinda stressful…however, with rates this low, we decided to take advantage of a place we a) lucked out to find and b) fell in love with.
Hopefully everything will work out!