OMG, Think of the Children!!!
Yes,I am being fascetious again, playing with numbers, but the Bank of Canada raising their overnight rate from 0.50% to 0.75% is a 50% increase, and it sounds oh so much more exciting than a 0.25% increase, doesn’t it?
This increase was expected due to possible inflationary pressure on the economy, and an attempt to maybe put the brakes on any rampant spending about to start up too.
An interesting statement is:
The Bank expects the economic recovery in Canada to be more gradual than it had projected in its April MPR, with growth of 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.
The economy is recovering, but not as fast as everyone thinks it is, so we won’t try to be the buzz-killers for the growth (yet), but stay tuned, we may turn the “free money” faucets off soon.
What was the best comment by the Bank of Canada in their announcement?
Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.
My translation of this statement is, we really don’t know how things are going to go in the next little while, so we reserve the right to possibly increase the rate again, but we probably won’t. Yes, that is about as wishy-washy as I can make my interpretation.
Remember where the Bank of Canada thinks the CPI is at currently:
Moral of this rate increase? It is going to get harder to pay down those loans soon, because the interest rates will be going up soon, so maybe think about investing in paying off your debts now.