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Canada Expected to Hike Interest Rates Following the USA

March 13th. 2017

The Bank of Canada has, once again, decided to maintain its policy rate at 0.5%, but the good news my be short-lived  The Bank cites “significant uncertainties”, particularly in the United States, and “persistent economic slack” as the key reasons for holding the rate.   But many see this as simply a placeholder until its Monetary Policy Report next month.

In the U.S, the Federal Reserve has given its most direct indication yet that rate hikes are coming for the US and soon.  Janet Yellen, the Chair of the Board of Governors of the US Federal Reserve System, said that rate hikes are likely to occur when they meet on March 14th and 15th.

“At our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Yellen said.

And more interest rate increases could follow. Yellen said, “We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect.”   The U.S. central bank raised its rate in December and has been estimating three hikes in 2017.

While some market watchers maintained that there was a chance for a rate drop in Canada, this new information out of the US will almost certainly diminish the probability of any rate cuts here.  And while the Bank of Canada still makes its own independent decisions about interest rates, our economy is highly integrated with the U.S. and decisions made that affect their economy inevitably affect the Canadian economy as well.  So the potential of multiple rate hikes for Canadians is very high in 2017 and a time to review your current rates is advisable.

For help and advice on whether now is the time to lock in a lower rate, call us at 604-588-4466.

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