June 1, 2010, 9:08 am

Bank of Canada Increases Interest Rates By 0.25%

by: The Financial Blogger    Category: Banks and You
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A very small note this morning as the Bank of Canada has finally decided to increase the overnight interest rate to 0.50%. This interest rate increase will obviously pushes Canadian banks to increase their prime rate from 2.25% to 2.50% in the upcoming days.

The recent positive economics datas (economic growth, inflation and drop in unemployement rate) are the most important reasons leading to this interest rate increase.  The Bank of Canada doesn’t consider that the economic problems from Europe should affect its future economic growth that much and I guess this is why we see a interest rate increase of 0.25% today.

The next schedule for the interest rate revision is due on July 20th. While this interest rate increase was expected, any further increase should be done very carefully as we are still going out slowly of the previous recession. Some economists report that they are afraid to see the Bank of Canada increasing their interest rate too fast as they did in 2002.

In my opinion, I am not very surprised about today’s increase. I was expecting no change to an increase of 0.25%. on the other side, I don’t think this event is the signal of the low rate party ending. I think we have another good 6 months to 12 months of low interest rate ;-)

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Comments

Impressive move from Canada, it is the first G7 country to raise its key rate..from 0.25% to 0.50%…but I guess it was mostly expected because the Cad$ barely moved when it was announced…

by: The Financial Blogger | June 1st, 2010 (11:29 am)

I wish they would have kept it at 0.25%… darn!

The future rise in the BOC rate will make it important to manage the LOC rates you can get from an institution. I was able to negotiate it back down after they raised it last year (early 2009 after 2008 meltdown). I am hoping they will give back secured LOC at prime.

by: The Financial Blogger | June 2nd, 2010 (1:19 pm)

@ Passive Income Earner,

I hope they do to! in the meantime, banks are making much more money ;-)

I think Canada is finally starting to get some global recognition for being a great place to invest. Probably the best banking system in the world and a ton of natural resources to boot. Good site. Keep up the good work. I will add you to my blogroll.

[...] announced last Tuesday, The Bank of Canada had increased its interest rate by .25%. While this is not catastrophic (it’s even good news to finally signal the exit  from [...]