Even with Inflation rearing its ugly head, the Bank of Canada is confident this is a short blip. They believe things will simmer back down in terms of the Core Consumer Price Index. With this in mind the Bank of Canada decided to keep their key overnight rate at 1.0% for the next little while, which is good news for borrowers, and not for those holding CSBs and such.
The loose money policy looks to continue for the foreseeable future thanks to a very conservative (if not bleak) view of Canada’s economic growth over the next period:
Overall, the Bank expects that growth in Canada will be slow through mid-2012 before picking up as the global economic environment improves, uncertainty dissipates and confidence increases. The Bank projects that the economy will expand by 2.1 per cent in 2011, 1.9 per cent in 2012, and 2.9 per cent in 2013.
The Bank of Canada does have a very optimistic viewpoint for inflation, though:
The weaker economic outlook implies greater and more persistent economic slack than previously anticipated, with the Canadian economy now expected to return to full capacity by the end of 2013. As a result, core inflation is expected to be slightly softer than previously expected, declining through 2012 before returning to 2 percent by the end of 2013. The projection for total CPI inflation has also been revised down, reflecting the recent reversal of earlier sharp increases in world energy prices as well as modestly weaker core inflation. Total CPI inflation is expected to trough around 1 per cent by the middle of 2012 before rising with core inflation to the two per cent target by the end of 2013, as excess supply in the economy is slowly absorbed.
So it looks like gas prices may drop off and they are hoping that will cool off our inflationary cycle? I certainly hope that might be the case, just so I can keep a few more dollars in my pockets. As long as their version of inflation keeps hanging around 2.0% we are safe in terms of interest rate increases (but that relies on lower or stable gas prices, doesn't it? Hmmm....).
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.
