Interest rate stays put as speculation continues

Interest rate stays put as speculation continues

The Bank of Canada's plan to maintain the key interest rate has been spot-on for the past 11 months, but there is speculation the trend could be ending soon.

"Based on what I'm reading now...the pendulum has swung in the direction that we'll probably see an increase in rates sooner than we originally thought," said Bruno Valko, a mortgage agent with Dominion Lending Centres in Kitchener, Ont. "Economics 101 in high school taught me if you print more money [you'll see] inflation. And if you have inflation, you're going to get an increase in rates."

Interest rates have been held at 0.25 per cent since April 2009, four per cent lower than they were in January 2008. The last time the central bank raised the overnight rate was July 2007.

"With rates as low as they are right now people are taking a hard look before they go out and either looking at getting a lower rate seeing if it's worth their while or getting their equity takeout now," said Mortgage Centre Canada broker Pam Gaunt, who is based in Saskatoon.

A release from the central bank reports the economy grew at an annual rate of five per cent in 2009's fourth quarter thanks to strong domestic spending, increased confidence and policy stimulus. The next interest rate announcement is April 20.

- Nick Lypaczewski

2 Comments
  • Jim FitzGerald 2010-03-04 10:15:48 AM
    With the Gross Domestic Product performing modestly and future speculation of higher unemployment rates, I believe the rates might have to stay put. Inflation is still holding below the bench mark 2%. That tells me that rates should not be a concern.
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  • George Janho 2010-03-09 4:39:50 AM
    My economics 101 taught me that when there is inflation, the interest rates go down to encourage spending and activate the economic cycle, proof is, the present interest rates. I disagree with Mr. Valko's economics.
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