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Bank Of Canada Set To Increase Interest Rates

July 12, 2017
By Antonis Vasloos
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For years, Canadians have been enjoying low-interest rates and low debts due to the lower interest rate. Recently, the Bank of Canada is keen on increasing the interest rates. This has worried Canadians because it will eventually result in increased borrowing costs.

The lift off for Canada has been scheduled for Wednesday. If the Bank of Canada goes through with the interest rate hike, this would be the first rate hike in the past seven years. This economic decision is significant for the country because the economy is already under tremendous pressure. The weak inflation has shaken the economy and the looming renegotiation of the North American Free Trade Agreement (NAFTA) isn’t good either.

Despite the setback, the labor market and economy, in general, is showing signs of growth. A slower growth has encouraged Bank of Canada to take a stronger action to increase the interest rates. The markets are betting 90% in favor of a quarter percentage rate hike on 12th July. The experts also say that another rate hike will be launched by the year-end.

However, market watchers are still unsure whether the bank will make the move in the upcoming week. The Canadians are now worried because they already own C$1.67 for every dollar they earn. The increase in interest rates will affect at least 700,000 Canadians who are already struggling with their debts.

The hawkish comments from the Bank of Canada have pushed up the yield on 5-year bonds by 50 points.