Thanks to humming Canadian economy and global economies, the Bank of Canada announced its decision to hike the overnight rate to 1.5%–an increase of a quarter basis point.
The Bank cited a couple reasons for its decision. First, the global economy is doing well–and expected to grow by 3.75% this year–while the US economy is proving stronger than expected. Second, Canada’s economy continues to grow close to capacity–with exports continuing to be buoyed by strong global demand and higher commodity prices–bringing inflation close to the Bank’s target of 2%.
Despite the good news, not everything is rosy in the Canadian economy. For one, the rising US dollar combined with concerns about trade actions have put downward pressure on the Canadian dollar. Household spending is being dampened by higher interest rates and tighter mortgage lending guidelines and trade tensions are weighing on investment in some sectors.
Regardless, the Bank warned that we should be prepared for higher rates to come–as they’ll be needed to keep inflation in check. While it’s true anything can happen, if you’re a variable rate holder you may want to consider increasing your mortgage rate now, to both acclimate yourself to higher rates and pay down a bit of extra principal in the process. If you’re feeling the pinch of higher interest rates, please feel free to give us a call and we can discuss the options available to you. We are here for you so please let us know if you have any questions. (778) 760-2844
The next Bank of Canada interest rate announcement will take place on September 5, 2018. You can find this BoC announcement in its entirety here.