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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