Bank Rates Hover Still
I did promise more of my missed opportunities. However, I decided to chat about the Bank of Canada and interest rates today. But worry not, gentle reader. I will return to my monologue of missed investing chances tomorrow, without fail.
The Bank of Canada announced that it will maintain the key overnight rate at 1 percent for another little while. The next announcement will be at the end of July. This means you have a little while longer with cheap(er) interest rates, but there were some really good commentaries in the announcement that I would really like to comment on:
While underlying inflation is relatively subdued, the Bank expects that high energy prices and changes in provincial indirect taxes will keep total CPI inflation above 3 per cent in the short term. Total CPI inflation is expected to converge with core inflation at 2 per cent by the middle of 2012 as excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers and inflation expectations remain well-anchored.
This has so many interesting little jabs in it:
- It talks about high energy prices being a major cause of inflation, which is kind of obvious
- Provincial indirect taxes being mentioned is interesting too. Taxes adding to inflation, sounds like something we should discuss with our Provincial MP’s? Ontario, you listening?
- Labour compensation stays modest? Yes, they are saying you aren’t going to get a very good pay raise this year either (unless you are a CEO of course).
- Excess supply in the economy is absorbed? Pardon? What do we have too much of, except for unemployed folks and debts? Not sure what this one is pointing at (I welcome your interpretations on that).
So many fun little tidbits in one paragraph, I love it, but the next paragraph is just as fun:
The possibility of greater momentum in household borrowing and spending in Canada represents an upside risk to inflation. On the other hand, the persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.
We are going to borrow more to keep up with inflation, but if we are lucky the Canadian dollar will stay strong and imported things will be cheaper, but then again if our jobs rely on exports, we might lose our jobs? Economics is really a fun subject where you get to argue both sides of an argument at the same time.
So, enjoy your cheap money for a little while longer. What was it like a year ago, well rates jumped 100% from 1/4% to 1/2%, so we are 100% higher than that now too, aren’t percentages fun to play with?
Interest Rates 2011
- Interest Rates Stay the Same But Mortgages Rules Get Tighter 2011 Raising interest rates in 2011 really slowed down the Real Estate world. Tighter rules for mortgages were also introduced. No, they didn’t, interest rates dropped again, and the charlatans simply found other ways to get around the rules.
- Slutty Money from Canada The term “Slutty Money” refers to loose and easily available cash due to low interest rates and ongoing monetary stimulus in March 2011. This article examines how Canada’s Bank of Canada policies, particularly the Key Overnight Rate, impact inflation, household spending, and investments. With economic uncertainty, a slow return to normal interest rates is predicted, but nothing in the economy is truly predictable. The piece highlights concerns over inflation, export challenges, and the risks associated with an overly abundant money supply.
- Loose Money Continues in May 2011 for Canada Explore the May 2011 interest rate updates from the Bank of Canada and what they mean for your investments and savings.
- Bank Rates Hover in Canada Again Explore the July 2011 rates from the Bank of Canada as it maintains its overnight rate at 1%. Understand the implications.
- Loose Money Continues in Canada (Sept 2011) The Bank of Canada confirmed no rate increases, September 2011, keeping the key overnight rate at 1%. Explore the implications.
- No Rate Increases in Canada (October 2011) Explore the current interest rate set October 2011 by the Bank of Canada and its impact on borrowers amid inflation concerns.
- Low Interest Rates to End 2011 from Bank of Canada Stay informed about the Bank of Canada rates for December 2011 and what they meant for inflation and future mortgage options.
I wouldn’t think a 25-basis point bump would hurt things, but what do I know, I’m just a lowly pheasant.
We’ll see what Mr. Carney has in store next month.