OMG Bank of Canada Rates up 100%!

in Bank, Bank of Canada, Bank Rates, Chutzpah, Inflation, Interest Rates

Interest Rates Double!!! OMG!! WAAF!!!

Yesterday the Bank of Canada did as I predicted (for the last 8 months) and raised their key overnight rate to 1/2% from 1/4%, which means the effectively doubled the interest rate or increased it by 100%! OMG! Yes that is the fun of working with really small numbers, is you can make up ridiculous headlines to cause folks heart attacks.

Try this catchy idea on for size: Does this mean banks will follow suit and double Mortgage rates? The answer to this question is no but it’s a sensationalized headline that you can have a lot of fun with if you want to cause folks to spit their coffee out during your morning coffee break (quote my blog if you want it to sound like it comes from a genuine authority (not that I am a genuine authority, but it sounds better when you back up your outlandish statement with, I heard the Big Cajun Man predicted this)).

A very interesting cautionary comment at the end of the Bank of Canada’s announcement:

This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

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.

Does this mean this might be the only increase for a while? Maybe, depends on how the markets react to the change, and whether inflation drops (which it might with Gas prices dropping again).

What will the banks do now? I think they have already “built in” this increase into their long term Mortgage rates, but they may take advantage of this and kick it up a little higher for a little more profit, but RBC and TD did yesterday too (sorry).

{ 3 comments }

  • Single Mom Rich Mom June 2, 2010, 12:05 PM

    OMG, you made me look! 🙂
    Any predictions for the real estate sector over the next six months?

    Reply
    • bigcajunman June 2, 2010, 12:34 PM

      My prediction is that the housing sector will remain occupied…

      Reply
  • 2Hirondelles June 2, 2010, 7:46 AM

    I would be very surprised if the major banks did not follow this with an increase in their lending rates. IMO, they’ll use any excuse to increase their profits.

    Reply

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