For first time in 7 years Canada raises interest rates today .. is this a beginning cross the globe?

robut

Well-known member
Joined
Apr 6, 2008
Messages
8,729
Bank of Canada Raises Rates For First Time in 7 Years

The Bank of Canada raised interest rates for the first time since 2010, citing a recent acceleration of growth that it predicts will eliminate fully the economy’s economic slack by the end of this year.

The central bank’s benchmark rate was raised to 0.75 percent, from 0.5 percent, at a rate decision Wednesday. It said future rate moves will be “guided” by the data, while downplaying recent sluggishness in inflation.


With the hike, Canada becomes the first Group of Seven country to join the U.S. in raising interest rates on Wednesday, potentially fueling speculation the world’s central bankers are heading into a tightening cycle.
So .. are we moving into a period of interest rate rises? Will this come our way sooner than we think via ECB?

If so ..

- consequences of this for people on trackers barely hanging in there even as it is?
- consequences for our banks who still have large number of unperforming loans / mortgages?
- possibility of more mortgage defaults?
- concerns for the good ship Ireland PLC?

( Put this here because Economy section description says "A vibrant and active discussion forum on finance & the economy in Ireland, Europe and the world." )
 
Last edited:


SideysGhost

Well-known member
Joined
Nov 30, 2009
Messages
17,360
The central bankers have been muttering for months all over the world about tightening rates in 2017/18. Hopefully sanity is starting to prevail and people are finally realising that ZIRP doesn't work and actually feeds and prolongs the hangover from a credit binge. Course they've only had the example of Japan for 25 bloody years to demonstrate how ZIRP doesn't work....
 

silverharp

Well-known member
Joined
Jan 21, 2015
Messages
16,326
ECB might be near the end of their bond buying, so gov borrowing rates might start to rise.
 

Kai123

Well-known member
Joined
Nov 24, 2010
Messages
1,029
A few months from a deposit and this happens!

If rent went a little lower and saving rates go up, I can stop worrying about getting out of the renting game.
 

gerhard dengler

Well-known member
Joined
Feb 3, 2011
Messages
46,739
Difficult to know what latitude Central Banks have to increase interest rates.

The level of personal, corporate and sovereign indebtedness makes any interest rates increase very problematic.

Interbank lending, or lack thereof, is another factor.

I agree that ZIRP and NIRP solve nothing. At best both policies buy time. That's all.

But buying time is only useful if legacy indebtedness gets addressed. I don't think legacy indebtedness has been addressed.
 

ShoutingIsLeadership

Well-known member
Joined
Jan 17, 2011
Messages
49,730
I've yet to figure out how raising interest rates on money already borrowed, as the cost of living is rising for those borrowers, is in any way a sane or rational thing to do.

Fine, raise rates on future borrowings, but to the ordinary person, adding to the cost of existing debt as the cost of living rises, seems daft.
 
Last edited:

robut

Well-known member
Joined
Apr 6, 2008
Messages
8,729
Difficult to know what latitude Central Banks have to increase interest rates.

The level of personal, corporate and sovereign indebtedness makes any interest rates increase very problematic.

Interbank lending, or lack thereof, is another factor.

I agree that ZIRP and NIRP solve nothing. At best both policies buy time. That's all.

But buying time is only useful if legacy indebtedness gets addressed. I don't think legacy indebtedness has been addressed.

+1

And i dont think it ever will as long as reactive Irish banks and govs are comforted by low interest rates etc. Maybe a sharp shock of interest rate rise reality WILL force a mainly always REACTIVE Irish Gov / Business interests to actually deal with it once and for all ?? In end of day .. its going to happen sometime anyway?
 

HarshBuzz

Well-known member
Joined
Feb 28, 2008
Messages
11,815
yes, rates will go up. Eventually. US rates are already rising. Euro rates will lag, as will Japan.

No, it won't be co-ordinated.

Yes, borrowers should be prepared for rate rises.

all Finance 101 type stuff though...and finally, this is good news
 

SideysGhost

Well-known member
Joined
Nov 30, 2009
Messages
17,360
I've yet to figure out how raising interest rates on money already borrowed, as the cost of living is rising for those borrowers, is in any way a sane or rationale thing to do.

Fine, raise rates on future borrowings, but to the ordinary person, adding to the cost of existing debt as the cost of living rises, seems daft.
Because the over-indebted have been living in an extend-and-pretend fantasy world for the last fncking decade. And all that legacy debt just gums up the entire financial and economic system. See: Japan since 1991.

The debt needs to be addressed, paid off, written down and otherwise flushed out of the system. This should have been done in 2008 but the politicians were too timid and the bankers too influential.
 

robut

Well-known member
Joined
Apr 6, 2008
Messages
8,729
Because the over-indebted have been living in an extend-and-pretend fantasy world for the last fncking decade. And all that legacy debt just gums up the entire financial and economic system. See: Japan since 1991.

The debt needs to be addressed, paid off, written down and otherwise flushed out of the system. This should have been done in 2008 but the politicians were too timid and the bankers too influential.
And Irish Politicians, Bankers only do Reactive not Proactive? Wait until after an event to deal with it & at that extend / pretend / kick the can forever ... But wait, thats the EU too :D
 

gerhard dengler

Well-known member
Joined
Feb 3, 2011
Messages
46,739
gerhard dengler said:
Difficult to know what latitude Central Banks have to increase interest rates.

The level of personal, corporate and sovereign indebtedness makes any interest rates increase very problematic.

Interbank lending, or lack thereof, is another factor.

I agree that ZIRP and NIRP solve nothing. At best both policies buy time. That's all.

But buying time is only useful if legacy indebtedness gets addressed. I don't think legacy indebtedness has been addressed.

+1

And i dont think it ever will as long as reactive Irish banks and govs are comforted by low interest rates etc. Maybe a sharp shock of interest rate rise reality WILL force a mainly always REACTIVE Irish Gov / Business interests to actually deal with it once and for all ??
It might compel them to act. Who knows?

I think the room to manoeuvre nationally, and internationally, is so restricted that even a relatively small increase in yields and interest rates would resonate painfully.
 

robut

Well-known member
Joined
Apr 6, 2008
Messages
8,729
Top takeaways from Bank of Canada’s decision to hike rates | Financial Post

BIG PICTURE

Canada is in the midst of one of its strongest growth spurts since the 2008-2009 recession, with the expansion accelerating to an above-3 per cent pace over the past four quarters. That’s the fastest among Group of Seven countries and double what the central bank considers Canada’s capacity to grow without fueling inflation.


Investors are looking at the decision as a possible harbinger of things to come globally and are monitoring it for clues on the central bank’s resolve for withdrawing stimulus, with the prospect of central bank tightening has triggered a selloff in government bond markets over the last two weeks.
AND:

The Bank of Canada’s next scheduled rate announcement is set for Sept. 6.

AND:

https://twitter.com/mz412/status/885159405658017792

Short recap: Canada raise interest rates. #Fed will further raise rates. #ECB starts tapering this year. $DJI at all time high. $VIX ~10.
 
Last edited:

PBP voter

Well-known member
Joined
Sep 18, 2015
Messages
9,254
Rising interesting rates means recovery.
 

ger12

Well-known member
Joined
Feb 25, 2011
Messages
47,680
An interest rate hike here will cause devastation.

Seriously, thousands of people, who now have growing families, bought during the boom and are managing full mortgage repayments every month (just about).
 

robut

Well-known member
Joined
Apr 6, 2008
Messages
8,729
An interest rate hike here will cause devastation.

Seriously, thousands of people, who now have growing families, bought during the boom and are managing full mortgage repayments every month (just about).
And thats being on TRACKERS ??
 

PBP voter

Well-known member
Joined
Sep 18, 2015
Messages
9,254
But we are already recovered I thought :D
The Eurozone policy is strictly for Germany and France.

The rest get thrown under a Bus.

FF FG Lab SF Greens-the pro-EU parties.

But the Brits were insane to leave the EU and decide on their own future. :roll:
 

Lumpy Talbot

Well-known member
Joined
Jun 30, 2015
Messages
27,892
Twitter
No
Rising interest rates internationally over the next few years could have an interesting effect in certain locations. For example the UK property market would be affected- although the Brexit vote has taken some of the bubble out of the London market because Chinese and Russian buyers who were seeking investment yield in that overheated market have hesitated in the last year rising interest rates would give them an alternative for hiding their cash where it effectively earns money as cash again.

It might also force some new realities for the PIIGs countries who are all basically rolling over debt on the long-term never-never and hoping growth will take care of the mountain of national debt over time.

We have been through a period where interest rates have come close to non-existence and where we have been close to a situation where holders of cash have had to consider a situation where the banks may ask them to pay for holding cash for them.

National economic policy setters may find that they may have to ease interest rates upward as we have had volatility in a low interest rate environment for so long that the only way to control monetary policies is to use interest rates as a stabiliser.

Either way I suspect in future years cash will again be king and it would be no bad thing for reality to intrude in the gap between record-breaking index figures on the markets and sluggish economies underneath.

I do think the fallout from rising interest rates could be of huge import in countries which depend on a flow of debt around property markets, the states where borrowing to fund education is a notable economic factor and even Germany where financing of car loans debt is an important factor in their export strength.
 


New Threads

Popular Threads

Most Replies

Top