Bank of Canada dropping hints about the approaching interest rate increase.
Canadians have enjoyed incredibly low interest rates for many years in a row, and grew accustomed to this state of events. However, it looks like interest rates will not stay at the all time low forever. Interest rate increase is coming up in the next two weeks, experts believe.
Stephen Poloz, the Bank of Canada governor, recently made a comment in an interview about the possible rise in interest rates in the near future. He stated that Canadian economy has been slowly recovering from the economic downturn of 2008 and sudden drop in oil prices of 2014. The two major cuts in interest rates “have done their job”, pushing Canada to the top of the fastest growing economies of G7.
Canadian dollar stands at roughly 0.77 of the American dollar, highest level since February. Poloz announced that the Bank of Canada has to make some important decisions with regards to interest rates soon. Changes may hit Canadians as soon as two weeks from now, with Bank’s scheduled interest rate discussion coming up on July 12th.
Some experts believe that Poloz dropped a big hint and it was a clear sign that July 12th meeting has some surprises in store. The last time when the Bank raised the interest rates was back in 2010. That year the benchmark rate jumped to 1%, and it remained there until 2015, when the Bank of Canada made the decision to cut it in half in order to absorb the shock from oil price drop.
What are the odds of an interest rate hike?
The overnight target rate is currently 25 basis points above the historic low of 0.25 per cent which was in place after the crisis of 2008.
The fact that Canadian dollar jumped on Wednesday could mean that we are approaching a rate Foreign investors bring their money to Canada to take advantage of higher interest rates, hence the increase in Canadian dollar.
It seems like rates are rising in other countries as well. The US Federal reserve began to increase its interest rates target. There have been talks about the Bank of England following. Furthermore, the European Central Bank is thinking about introducing changes as well.
Canadian economy has been standing strong, with its low interest and unemployment rates. Thus, experts believe that increase in the rates is coming soon. It is the anticipation of the rate increase, which has made the Canadian dollar enter the top 10 best performing currencies.
How well is Canada doing?
While the economy is standing strong, it is still showing a number of concerning trends. First of all, Canadian exports are quite low, yet low loonie is creating a good soil for export increases. Oil prices are still quite low, so there is a lot of doubt and uncertainty around how trade will evolve in the future. However, North American Free Trade Agreement is coming into play, with Canada, Mexico and the US gathering for negotiations in August.
According to Poloz, Canadian economy is currently strong enough to withstand the hike in interest rates. Canada got through the negative impact of the oil crisis, and its GDP has been steadily growing over the past ten months.
What should you do?
Take advantage of the fixed rates while they are at the record low. If you are thinking of investing in a home, do it now to enjoy lower payments. Refinancing and switching to a fixed rate is another financially sound idea. Home and Mortgage advice team has been working in the field of mortgages for ten years, and can provide the most professional advice and most competitive rates on the market. Don’t miss the opportunity to take advantage of today’s low rates before they climb and contact us today.