Bank of Canada raises interest rate


well the cost of carrying some loans is rising again that’s after the Bank of Canada decided to hike its Benchmark rate by 25 basis points so it’s down one and a half percent Jenny Lee is here with more that so of course do you know anyone who’s borrowing money whether you’re a consumer businesses and be more expensive now yes it’s true that some forms of loans and some forms of burrowing will arise in Tandem and so lines of credit some types of personal loans and certainly those variable rate mortgages will cost more and we’ll just show you how much today’s hike will mean a for I tip a mortgage of $100,000 for every $100,000 the monthly payment will go up by about $13 but this is not just today this is the 4th grade in a year so cumulatively we’re looking at somebody with a variable rate mortgage who is going to be paying you know 260 $300 more month is now in the in the hundred so it’s starting to hurt so the bank you know it had been hesitant to raise rates too quickly too much because people do have so much debt in Canada but the other thing is there’s been a lot of uncertainty over what NAFTA will look like negotiate isn’t done with it and also this side now you know burgeoning tariff disputes between the US and Canada don’t know what impact that’s going to have on the economy so the bank had to tread lightly but at the same time it had to inflation so here’s what the bank had to say about the effect of trade disputes on the economy and why it has to stay cautious this effect of uncertainty is now judge to be larger given mounting trade tensions although there will be adjustments are some Industries and their workers the effect of these measures on Canadian growth and inflation is expected to be modest now that’s all in the present tense at the bank went on to say that it will be watching all of this and will continue to a judge accordingly interest rates accordingly depending on the data depending on what happens with your calling me that’s also a hint so much more than right that’s not trying to bring up there late connecting but it could happen it could happen in certainly made it that clear in the last line of it’s a statement today right okay thank you so much Jenny and now we are heading I want to take a look at the governor Steven Paul office about to speak and talk about that interest rates decision let’s listen in life the governor Steven polus will start with some opening remarks and then we’ll be happy to go straight to your questions I leave food the pokeballs catch Jon-Don Orlando Fitzgerald about you and what they wanted to follow-up so please just indicate to me if you’d like ask a question I’ll take down a list with that I’ll hand it over to Governor polis for his opening remarks okay thanks Jeremy good morning everybody seems to be here to answer your questions about is interest rate announcement and our monetary policy report before taking your questions I want to give you some insight into government council’s deliberations our discussion began with the big picture inflation Is On Target the economy is operating close to capacity are outlook publish today is that the situation will continue governing Council believes that will be needed to keep inflation On Target and that’s consistent with our actions today if he did take them out at add a pound to draw paint projects news that we faced their bank is particularly data-dependent at this time however that doesn’t mean that monetary policy will react to every day to fluctuation a better way to think of this is that it takes hundreds of data points make a complete picture and each new one helps the picture come into sharper Focus going to datapoint comes in different ways and what the bank or other forecasters expect it matters to the big picture but it’s almost never decisive on its own no as we previously discussed and important issue we face as you understand how the economy reacts to higher interest rates given the hide that loads being carried by Canadian households or monitoring the situation very mostly we seen a moderation and credit growth and the debt to income ratio has begun to Edge lower at the same time the housing market is also dealing with the revised v20 Landing guideline and the date of don’t yet Amanda Sharp distinction between the impact of the guideline and the effects of higher interest rates governing council did take some comfort from an analysis of the renewal process for 5 year mortgages taken out in 2014 2015 what you’re up for renewal in 2019 and 2020 I listen to Alice’s shows a very modest increase in debt service ratio compared with the date of origin Nation okuda Minaj on Villard Avenue Altamonte say st. Daniel’s in a few so I bet you a ideal Avenue Plus eleve Monte De Ponce de consagracion of course this issue is most important for highly indebted households we also know that will be great mortgages interest rates were at their lowest levels that’s in 2015-2016 so the mortgage renewal process is likely to weigh on the economy more in 2020 and 2021 all that said governing Council concluded that the economy should be resilient to higher interest rates provided that labor and calm continues to grow in our discussions the biggest issue on the table was trade tensions new level on GTA V near Delano news of y’all to review supposed to be today in new levian entegris an ultra projection on the reason deposition by the US government of actual tariffs on Canadian exports as made situation more Concrete in the projections were presenting today we got any more negative judgment to our business investment forecast in recognition of this we’ve also Incorporated the effects of the US tariffs on Steel and the various countermeasures implemented around the world box to in the NPR gives the flavor of the complex effects sucks actions will have to let me summarize briefly are you as company important Canadian still wants now pay a 25% Tara they may instead by still made in the US or in some other country or if no obvious they may just pay the higher price or the Canadian company may offer to reduce its price in order to absorb some of the terrorists impact or it may look to other markets to sell its products Capri’s but the palms of el postulate awarded win for us secure secure the result of the shotgun on the circumstance and then there are the counter measures impose a 25% tariff on steel imported from the US now this would seem to level the playing field but many of the same complexities enter the analysis All Things Considered our analysis suggests that Canadian forts would fall as would Canadian Imports prices would rise at a time when the economy is already operating at capacity so inflation would rise at least temporarily but the effect could persist consumers would have lost purchasing power so demand would slow meanwhile the potential the economy would be eroded as companies invest last and become less competitive so and to supply resulting in two sided risks to the future of inflation further more than that effect on the economy might be buffered by any physical actions that governments might take now as we said the NPR these various effects are likely to be small for the measures that have already been taken and contrast a large tariffs on Canadian made automobiles in Parts without a much greater effect on trade and the economy through the same channels people are understandably concerned about the sort of escalation I want to know how monetary policy might react to it indeed there was speculation that the bank wouldn’t move interest rates today because of the possibility of further measures but the bank cannot make policy on the basis of hypothetical scenarios we felt it appropriate to set aside this risk and make policy on the basis of what has been announced given a multiple channels through protections measures affect economies it should be clear that monetary policy is ill-suited to counteract all of their effects of course play a supporting role in conjunction with other policies bluntly the economy was slow inflation would rise and the exchange rate would appreciate adding further to near-term price pressures in the Canadian economy there for the implications for interest rates of an escalation in trade actions would depend on the circumstances should Covert Avenue so ID info probably a conductor economy it’s on Bonne Sante belt or ask him to please I’m besties Mimzy sometimes as it then oxygen to survive a Vigor Acer to I’m flash y’all at lscb it’s important to remember that our economy is in a good place where operating near-capacity companies are investing even if summer has dating a labor market has been strong and most importantly inflation Is On Target it has contact higher interest rates will be warranted to keep inflation near Target governing Council will continue to take how to approach to adjusting rates Guided by incoming data with listening into all of that as we were listening to the governor speak and he did mention a lot of different considerations in terms of making this well it’s like juggling a whole bunch of balls in the air and weighing each one to see exactly you know what to do when it comes to raise and he mentioned I died and that you know given the people’s high debt load this is always going to be something the bank has to consider given how a lot of people really have massive mortgages and record levels of a household debt he did know that there’s been some Cooling in the Addition tattoo. So people aren’t piling on debt like they advance for a while there and also the housing market is starting to cool a little bit but at the same time job wages are going up we see that in the employment report every month or so and this means that maybe one more resilient to higher rates and that’s why he figured okay well maybe they can handle it and so that would be a checkmark on the in a column of yes to raise rates but in a note to raising rates would be all of this uncertainty over trade after negotiations don’t know what that’s going to look like at the end of the all of the negotiations and horse now this tariff dispute between the US and Canada and so given that and everything else and PackIt inflation is starting to heat up a bit so she was at wage inflation he felt that rates were warranted in terms of an increase that doesn’t have been historically low for so long and part because of concerns about the account so I guess he’s saying well okay now we know wages are pretty good the economy is doing alright we can start getting into a normal range but that’s tells going to create pain for people who do have a lot of that it sure will because rates actually did not move Rock Bottom for seven years until last year in fact it’s going to be a year to the day tomorrow when rate started to go up four times now including today and all those people who borrowed heavily Got That Rock Bottom level text even pulled out to mention that people who took out mortgages in this Rock Bottom irra will really start to feel the pain in a few years when they renew their right rate mortgages so he say that in the Years 2020 and 2021 that’s when the reality will hit with him people when they renew so he did make a special mention of that right okay thank you so much
The Bank of Canada has decided to raise its benchmark interest rate to 1.5 per cent, up 25 basis points — 0.25 percentage points. It’s the fourth time the central bank has raised its rate since last summer.

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