Canada’s Key Interest Rate Is On the Rise For the First Time in Seven Years

The Background 

For the first time in seven years, the Bank of Canada has raised the key interest rate to 0.75%. The hike isn’t much of a surprise, experts have been predicting the change for months and Bank of Canada governor Stephen Poloz has been all but spelling it out over the past few weeks. The decision was fuelled by our “robust economy” and increased household spending. CBC

Why You Should Care

A few reasons–some are good and some are not-so-good. First, the good: the hike sent the loonie up 1.23 cents, and as of markets’ close yesterday, it was trading at US 78.62 (which is quite good for our struggling currency…and our cross-border shopping). Now, the not-so-good: if you have a variable mortgage, your payments are going to go up. If you have a line of credit, your rate is going to go up. It’s also a pretty good sign that interest rates are going to continue to rise. While we’re happy to see the economy recover from the 2008 recession, we’re not so happy to see our bills increase.

What’s Next?

Sherry Cooper, chief economist at Dominion Lending Centres, said she expects another hike in the fourth quarter of 2017, “the Federal Reserve will also likely increase rates in [the fourth quarter]. Look for a slow crawl upward in interest rates from both central banks in 2018.” The next interest rate decision is scheduled for September 6.

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