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Experts Warn: Key Interest Rate Will Likely Rise Again in April

Experts Warn: Key Interest Rate Will Likely Rise Again in April
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While the country is still reeling under the news of the rise in interest rates by 25 percentage points by the Bank of Canada this January, more information is being released by the Parliament’s fiscal organization. Experts are looking at a projected further rise in interest rates by an added 25 percentage points in April in response to the slowing of the economic growth.

Is there anything good to look forward to? It is if you count the fact that the federal deficit is lower than was previously estimated this year.

The Parliamentary Budget Officer (PBO) has released its Economic and Fiscal Monitor report that estimates Canada’s gross domestic product may rise by 0.1 percentage point to 2.9% for 2017. This figure is lower than the projections made last fall and to quote the experts, the causes could be “weaker than expected” growth in the third quarter of 2017 and “historical revisions.”

 

The PBO added, “We continue to expect that the Bank of Canada will again raise its policy interest rate by 25 basis points in April.”

Homeowners, consumers, and borrowers could be looking at a rise in the key interest rate by 25 percentage points to 1.5%.

And, there’s more! The PBO has noted a drop in the estimated spending which is around $2.2 billion lower than previously estimated and a $0.5-billion rise in projected revenues. This factor has resulted in an estimated deficit of $18.5 billion which is $1.8 billion less than the estimate in October and translates into a drop of 0.9% of Canada’s GDP for this fiscal year.

Program expenses are expected to be lower due to lower Employment Insurance benefits and slower-than-anticipated growth in direct program spending.

The report goes on to explain that the government’s efforts to kick-start investment in the infrastructure sector is also a factor.