Ali Hanif January 15, 2018 No Comments

Interest Rate Increase Is Imminent

Prepare for another increase in interest rates on Jan. 17th, the date of the Bank of Canada’s next monetary policy announcement (decision on rates). It is Tembo’s prediction that the possibility of another hike from 1% to 1.25% is extremely high. While it is possible that the Bank will hold off on a hike until later, given the recent release of some important economic statistics, the likelihood of a hike is sky-high. Economists, bankers, and the media are all anticipating a hike.

interest rate increase

Low unemployment is the likely precursor to a hike

  In December of 2017, the Canadian economy added 79,000 jobs, lowering the country’s unemployment rate to 5.7%, the lowest in over 40 years. Every region of the country added jobs, with most of the growth in Quebec and Alberta. Most of the jobs were full time and private sector, another sound aspect of the increase. More jobs will increase spending and will further add pressure to inflation, which is creeping up, albeit very slowly. The consensus among experts was that the Bank of Canada would wait for the latest employment statistics before making its decision and essentially every economist was amazed at the sheer number of jobs created. The Canadian dollar surged to almost 81 cents on the strong news.

CDN Dollar rate

Job market is booming

The sectors that are seeing the most job creation are services and manufacturing, public sector job growth which was strong in 2017 is beginning to decrease. Across the country, job numbers are growing and there is a growing diversification away from construction and energy related jobs which is a positive sign. January jobs numbers will be interesting as they will reveal if so much of the reduction of unemployment was seasonal due to the holiday season. Either way, higher interest rates will make it more expensive for Canadians to acquire mortgage debt, especially first-time buyers.

unemployment rate

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