Rise of Interest Rates

By Elli Davis, April 23, 2010

we should get ready for a rise in interest rates
photo by Kenneth Hynek

The monetary policy review from the Bank of Canada released on Tuesday suggests that we should get ready for a rise in interest rates in the near future. For now, the bank is keeping its key lending rate at 0.25 percent. But statements from the central bank signalize a possible increase in the next few weeks.

It is now quite appropriate to “lessen the degree of monetary stimulus”, the Bank claims. The recent improvements in the economic outlook – the improving housing situation and overall economy – are the main reason. Even though the bank had promised to keep low lending rates until the end of the second quarter, it is now questionable whether it really will, considering its recent statements. As claimed in the review, it all depends on the outlook of the economic activity and inflation.

Actually, I’m not shocked at all by this. I had expected a rise in rates, but what I am a little surprised about is that it did not happen earlier.

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