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10 Jun

Rising interest rates, why now?


Posted by: Tracey Brock

When the Bank of Canada raised its Bank Rate by 25 basis points to 0.75% last Tuesday, there were already a few grumblings from Canadians in the housing sector and elsewhere who thought interest rates should remain at an effective rate of almost zero for time immemorial so they could continue to borrow cheaply. That would be unwise and short-sighted for reasons to be explained.


Of immediate concern is that there are perhaps too many Canadians, at least those under the age of 40, with no historical recollection of how unique the current low-interest rate environment has been and still is.


A bank rate of half a percentage point (and an overnight rate of 0.75%) is unheard of in Canadian history, at least as far back as Bank of Canada records go, which is to 1935. In the depths of the Great Depression, the central bank rate never dipped below 2.5%. In the late 1940s and until 1950, the rate did decline to 1.5%, but never lower.


Click here to read more in the Calgary Herald