The Bank of Canada raised its overnight lending rate by 0.25%. This will lead all the major banks to raise their Prime Rate to 3.00% by the end of the week. The announcement indicated that the Bank thinks that economic growth will be difficult given the high unemployment in the USA and other economic factors in Europe and other mature economies, but that the current rate is historically very low and could be increased without much of an impact on the economy.
If the Bank raises their
GDP grew by 0.5% in the second quarter, after increasing by 1.4% in the first quarter. This is well below the expected 2.5% by many analysts. It is no wonder: although the unemployment rate has dropped it seems that things aren’t chugging along as robustly as some may think. The USA is still in turmoil from an economic standpoint, and our exports are suffering. Hopefully our manufacturers are using the high Loonie to purchase equipment to make them more efficient.
While some people
Fixed Rates are coming down. Most lenders with give clients a 120 day rate hold of 4.19% for a 5 year fixed rate term, and some are giving lower rates depending on the size of mortgage, closing date, and limited features (like only being able to pay monthly). We will probably see 5 year fixed rates settle in the high 3 per cent range as more and more economists and consumers predict the US is going to slip into another recession or suffer deflation.
The perplexing picture in all this
I like it when people get off the fence, particularly when the people getting off the fence are economists.
In The Milken Report (www.milkeninstitute.org) Ross DeVol states that the US economy will add approximately 2 million jobs in 2010 and 3 million jobs in 2011, and that GDP will grow by 3.5% in 2010 and 3.7% in 2011. He continues by stating that he believes inflation will remain low, and that the bulk of the improvement in employment and GDP will be spurred on by the Fed keeping
The Bank of Canada raised its overnight lending rate by 0.25% on Tuesday this week. Surveys showed that economists were split in their projections of whether the Bank would raise rates or note, citing a variety of reasons either way.
We are likely to see one more rate hike before the end of the year (maybe two) by the Bank, which would send the Prime Rate to 3.00%. The current Prime Rate is 2.75%, and still abnormally (and historically) low.
Unemployment was 7.9%
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