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Interest(ing) Rates: An Opinion Piece

Much has been made of interest rates lately but let me say, again, as an opinion – my crystal ball is broken – interest rates are not going up anytime soon.

There are a number of reasons why I believe this. Some of them are technical – there is what economists call ‘slack’ in the economy. Meaning, there is room for resources to be used more than they currently are. Another is that inflation is still low and yet another is what may end up being deflation in the Eurozone.

But the real reason, the simple reason, is that there is too much debt in Canada for the Bank of Canada to hike the rate without submarining the economy. Here, CTV reports that last year Canadians peaked as borrowers – it has come down a bit since then but not by much.

Ultimately, rates change as they do and eventually they are likely to go up at some point in the future. But for the next year or so, I’d be shocked if they did.

October 1, 2014
Chris Worby, FMA