August 4, 2017
The Bank of Canada did increase its key interest rate on July 12, 2007 to 0.75% from 0.50%, the first increase in 7 years. This is in spite of a continued low annual rate of inflation of 1%. The Bank may be reacting to increased housing prices in urban markets and also to the amount of rising consumer credit outstanding. Perhaps a comparison was made to the Reserve Bank of Australia’s cash rate of 1.50%, both countries having similar economies, i.e. exporters of natural resources. Canada’s major banks followed through with increases of 0.25% to their prime lending rates to 2.95%. The Canadian dollar that had slipped to a low of 73 cents to the US$ made a spectacular increase to over 80 cents and is currently trading at around 79 cents to the US$. Commodity prices appear to be on the rise even while measured in a slightly lower US$, oil at around $49-50, gold $1250-1260 and copper at $2.95. Individual investors appear to be attracted more to ETF’s as opposed to particular stocks while more institutional investors are going into alternative investments. As long as interest rates remain low the bond market continues to be unattractive.