March 1, 2010
In a report released by Statistics Canada on Monday, it was noted that GDP growth was 5% in the fourth quarter which was higher than previous projections. Sweet…right?
Not so fast. In the world of economics, surprises, even seemingly good ones, almost always cause a period of instability. I mean, sure…our economy grew which is great. But what does that mean for consumers?
When the financial crisis hit central banks, including our very own Bank of Canada, decreased interest rates in tandem. Lower interest rates encourage consumers and businesses to purchase things that require a loan (like homes!). Well, Bank of Canada, you sure got what you asked for! Canadians went WILD buying homes. And now the growth figures are reflecting these purchases.
Now’s the time to rein it in! The Bank of Canada promised many times that they would not increase interest rates until the summer. And now, the likeliness of rate increases is even higher. So hold onto your hats, mortgage holders, you might be in for a wild uphill ride and this time not in prices– in your monthly payment.
“This report shouts strength, and increases the odds the Bank of Canada will begin to hike interest rates in July and stay on that path in the following decisions,” said Douglas Porter, deputy chief economist at Bank of Montreal. The Globe and Mail