The Bank of Canada kept their key overnight rate at 1/4 per cent, yesterday, keeping with their plans to keep the cost of borrowing money low until mid 2010.
In Canada, as expected, the composition of aggregate demand is shifting towards final domestic demand and away from net exports. In the third quarter, the balance of these shifts resulted in weaker-than-projected GDP growth. Core inflation in recent months has been slightly higher than the Bank had projected, although total CPI inflation remains close to projections.
So you can read between the lines that inflation is starting to worry the bank a little, but for now they are not willing to turn up rates to maybe combat it before it gets rolling. If fuel prices remain low, inflation may remain under control, but if there is a spike then we may see big interest jumps in reaction to this sooner than June of 2010.
My advice to those who ask continues to be, take advantage of these low rates to PAY OFF debt, not get more debt. If you can afford to make over payments on your debt vehicles, do so, you get more bang for your buck, and you’ll get better pay back than most things you might invest in, these days as well.
TD Rates Up
TD followed through with there promise to screw up my Secured Line of Credit making it a “Prime” (their definition of it, not the Bank of Canada’s) plus 1.0% rate, instead of the “Prime” + 0.5% that it has been for the past 8 years (dating back to my days with Canada Trust). The explanation for this increase was very suspect (in my opinion), claiming that the borrowing markets are tight and it is much harder for the bank to borrow money. What does this have to do with an existing loan that they underwrite?
I think I would respect more a statement like, “See if you can find a lower rate somewhere else, we dare you!”. That kind of statement makes much more sense to me.