Bank of Canada Raises Key Lending Rate 0.25% - Sept 6, 2017

[TimLacroix]

The Bank of Canada has raised its key interest rate by one-quarter point to 1.0 per cent.

This move has also put pressure on fixed rates with the 5-year bond yield up... we are likely to see increases to fixed rates soon too. If you have questions, please reach out!

The next scheduled date for announcing the overnight rate target is October 25, 2017.

To view the announcement - click here

[blownz]

Where are all the people that said the BoC could never raise rates?

Again though, I will be interested to see if the banks pass the full 1/4 point onto prime. I expect them too, but still funny when they only passed .15 of the drop on the last two times. They also only added .15 onto interest rates they were paying the last time prime went up .25

They always seem to quietly make more money.

I was thinking about buying some USD so today will hopefully be good for that.

[phreezee]

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Where are all the people that said the BoC could never raise rates?

I think ZenOps was the only one saying that. The rest of us knew Trudeau's out of control deficit spending would inevitably cause a rise in interest rates.

I locked in last year and was surprised it took this long.

[HiTempguy1]

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I think ZenOps was the only one saying that. The rest of us knew Trudeau's out of control deficit spending would inevitably cause a rise in interest rates.

I locked in last year and was surprised it took this long.

Apparently you can still get 1,9% variable on 5 year even after two rate hikes. I thought 2.54 fixed for 5 was good (and its now lower than any fixed rate I can find on rate hub, so thats cool). Would save me $50/month on the mortgage, so meh.

[JustinL]

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The rest of us knew Trudeau's out of control deficit spending would inevitably cause a rise in interest rates.

Can you explain the mechanics of this to me?

[suntan]

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Can you explain the mechanics of this to me?

As you accumulate more debt you have to give a higher rate of return to investors. Because:

a) You're using up demand, so you need to encourage them more to invest.
b) You become more risky, since you have so much debt.
c) The spending that results from the debt causes economic activity, so you have to raise rates to keep inflation in check.

[blownz]

Has anyone noticed if savings account rates have increased anywhere? They seem to be the same still. I know with the last increase in prime I didn't notice any move up.

[phreezee]

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Can you explain the mechanics of this to me?

Increased aggregate demand (AD) - (the current state)

A budget deficit implies increased Government spending (G), this will increase AD and this may cause higher real GDP and inflation.

Future – higher taxes AND/OR lower spending - (Liberals=higher taxes as they run a structural deficit and don't plan to balance for decades)

In the future, the government may have to increase taxes or cut spending in order to reduce the deficit.

Increased interest rates/bond yields

If the government borrows more, this can cause interest rates to increase. This is because they will need to increase interest rates in order to attract investors to buy the extra debt. In 2012, countries in the Eurozone saw a rise in bond yields because there was a lack of confidence in Eurozone economies and the ability to finance the deficit.

Crowding Out - The government becomes the biggest employer.

Increased government borrowing may cause a decrease in the size of the private sector. The government borrow by selling bonds to the private sector. Therefore, if the private sector (banks/private individuals) buy government bonds, they have less money to invest in private sector projects. If there is crowding out, government borrowing will not cause higher aggregate demand. Breaking point for GDP growth where increased deficits have no benefit and just result in higher taxes.

It's a vicious cycle of the government spending which in turn crowds out the private sector and will be compounded by the current Liberal attack on small businesses with the tax reform proposals.

[Super_Geo]

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Has anyone noticed if savings account rates have increased anywhere? They seem to be the same still. I know with the last increase in prime I didn't notice any move up.

2.3% with EQ Bank on a normal savings account. CDIC insured.

[HiTempguy1]

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Has anyone noticed if savings account rates have increased anywhere?

Oligopoly/collusion is an amazing thing. Just like the banks don't change lending rates to match BoC rate decreases/increases, they also rarely follow with saving account interest rates.

[soloracer]

Not sure if I should be happy or sad.....my credit card rates are most definitely going up, but the parts I buy out of the states just got cheaper........

[Twin_Cam_Turbo]

Was thinking of picking up one of my dream cars but I think I'm just gonna leave the money in my account for the next few years and see what happens with the economy.

[Xtrema]

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Not sure if I should be happy or sad.....my credit card rates are most definitely going up, but the parts I buy out of the states just got cheaper........

You mean HELOC rates. Most CC rates are horrendously expensive.

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Can you explain the mechanics of this to me?

You don't have to go far, just look at NDP Alberta. Or Italy or Spain before EU bail outs.

The problem with loans is that it's only cheap when you don't need it.

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Apparently you can still get 1,9% variable on 5 year even after two rate hikes. I thought 2.54 fixed for 5 was good (and its now lower than any fixed rate I can find on rate hub, so thats cool). Would save me $50/month on the mortgage, so meh.

You checked too early. Everyone is up today.

[blownz]

On the plus side I just got a bunch of USD at 1.2100 which is the best rate I have had in a long time.

[HiTempguy1]

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You checked too early. Everyone is up today.

Yessir, you are correct.

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On the plus side I just got a bunch of USD at 1.2100 which is the best rate I have had in a long time.

I'm super stoked on the CAD vs GBP right now as well as the CAD vs USD. Seriously lowering my inventory costs!

[blownz]

So the Royal Bank increased their high interest savings account by .1% lol

[Disoblige]

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So the Royal Bank increased their high interest savings account by .1% lol

Yeah boi! Double meat Subway and Sumo size Edo!