The Bank of Canada (BoC) is keeping its trendsetting interest rate at 1%, as it did in October, but is warning Canadians that increases may be on the way.
This interest rate is called the “Overnight Rate” and is what dictates the prime consumer lending rates of Canada’s “Big Five Banks.” The bank hiked the rate back-to-back in July and September and cautions that it will likely increase rates in the coming months.
Why did the interest rate stay the same?
The bank cited positives in our economy that could lead to an increased rate in the future. These included encouraging job and wage growth, sturdy business advancement, and the resilience of consumer spending despite increasing debt and higher borrowing costs.
On the other hand, the bank says that exports have dropped more than expected, and there still are many unknowns when it comes to trade relations with the U.S.
If you’re wondering how this news affects you, we’ve got you covered.
Lending rates will stay the same, for now
When the BoC raises its interest rate, prime lending rates follow – which currently sit at 3.2%. “While higher interest rates will likely be required over time, (the bank’s) governing council will continue to be cautious,” the bank said in a statement Wednesday.
Interest rates on personal loans depend on the individual, but borrowing from banks may become more expensive in the future. Consumer debt is also at an all-time-high – Canadians carry, on average, $22,125 in consumer debt. This is why many consider a Borrowell personal loan attractive: your interest rate won’t change.
The loonie slips
The Canadian dollar has slipped, compared to its American counterpart. The loonie has dipped below 78.5 cents, compared to 79 cents before the news.
Moving forward, the bank says it will remain cautious. It will also be influenced by incoming economic data such as wage growth, job growth, Canada’s economic capacity and how the economy reacts to higher interest rates.
The BoC’s next scheduled announcement is set for January 17th, 2018.
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