Bank of Canada May Not Raise Interest Rates
Interest Rates May Not Increase
Canada’s Economic Growth Slows
What Is Employment Insurance (EI)?
In Canada, the economy has done better than elsewhere in the world and that led the Bank of Canada to raise interest rates to help kept he economy moving. However, as the economy begins to stall, there is speculation that the interest rate may not increase much more, freezing altogether.
According to Bank of Canada Governor Mark Carney, the concern about a stalling recovery may result in the lowering of the interest rate for the first time in a year. The interest rate has gone up from .25 percent to one percent over three increases in the past few months but since the economy of Canada shrank for the first time in 11 months, there may be no more increases.
The Bank of Canada was the first Group of Seven central bank to raise rates following the recession, well ahead of the United States which is now looking at having another stimulus package made up to help their economy.
Jim Flaherty, Canada’s Finance Minister, has said that a slower growth will not trigger a new round of government spending. He also said the $47 billion stimulus package will be ending, which the Bank of Canada expects will cause the economy to shrink by .2 percent by next year.
Weak consumer spending has also meant that the CIBC World Markets cut its 2011 growth forecast because of the low spending and lack of U.S. exports. Carney also said that because of the sluggishness of the economy now, the interest rate will not go up until at least March to June next year.
There have been many obstacles to the recovery of the Canadian economy lately, especially due to the jobless rate in Canada, which stands at 8.1 percent. This is two percent higher than it was during the beginning of the recession.
Another concern with the economy is the fact that the real estate market may be heading to a bubble. In the past year, the real estate market was riding high on low interest rates, but as the interest rates increased, an imbalance happened, causing the possibility of a housing bubble to become much higher. This has many concerned because the surging real estate market in places like Toronto and Vancouver helped the economy grow immensely during the last part of the recession. In addition, other parts of the economy were doing better. Since the interest rate went up though, things have changed and many are beginning to think that the raise in interest rates was actually a bad idea, causing the economy to shrink. With no more increases expected until next year, the economy will hopefully recover and continue to lead the world in its strength. Whether that will remain the case is something that will have to remain to be seen in the future. There is still a good chance that the interest rate will decrease soon though, if the economy continues to be stagnant in the coming months.
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This entry was posted on Friday, October 8th, 2010 at 8:44 pm and is filed under Canada and Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
