Interest Rates to Climb?
Prince George, B.C. – There is growing speculation the Bank of Canada will increase its key interest rate before the year end, and possibly as early as this month.
The Canadian dollar has been moving up against the American dollar, and the price of oil has slipped a little. Bank of Canada Governor Stephen Poloz recently told media in Germany that while the current economy looks good, the Bank of Canada has to plan for a year or two down the road.
The current key interest rate of the Bank of Canada is 0.50%, it has been that way since 2015 when the rate was reduced in the wake of the Ft. McMurray fires and the resulting drop in oil production. Boosting the key interest rate by 0.25 basis points, would simply restore the rate to what it was before that 2015 reduction.
But oil prices are in the healthy range once again and the latest report from the B of C indicates confidence from business and consumers for the balance of 2017.
The BC Real Estate Association says with oil prices relatively stable, “there is no longer a need to keep interest rates at their current level. Secondly, rapid growth in the Canadian economy means that slack in labour and products markets is being eliminated faster than expected, which should begin to put upward pressure on inflation, with a return to the Bank’s 2 per cent inflation target sooner than currently projected.”
Some are predicting an increase could come as early as July 12th, with a second boost possible before the end of the year. The BCREA is a little more cautious, suggesting the Bank of Canada will hold off on any increase until early 2018.
If the B of C increases its key interest rate, it will be the first time it has been increased since 2010.