When will interest rates rise?

[Hoops]

I don't think the house bubble will burst til interest rates rise by at least 2 percent.
When and why will this happen? Any theories/opinions?

 

[Fractals]

BoC recently raised the interest rate by .25 and there should be another increase coming sometime in the first quarter of 2011. It may take a year or two for that 2 percent increase to happen and it will happen only if the US increases its interest rates too. Canada will be hurt economically if its interest rate is significantly higher than the US as this will devalue the USD making Canadian goods and services more expensive and less attractive.

 

[FunSugarDaddy]

I personally wouldn't worry about rates going up for at least a year. Not saying they would rise a little, but nothing dramatic. For the most part anyone who has a sizable chuck of their mortgage paid off, should probably go with a variable mortgage.

 

[Hoops]

I think both the American Fed and Bank of Canada will continue to increase the money supply rather than increase interest rates. I know that this grates on how the Harper government thinks things should be - but, they got a reduction in economic activity when they raised interest rates .25% and it's more important to keep economic activity going than to try to arrange the world to old economic ideas.

The reality is that we would be looking at unemployment in the teens, a sharp reduction in economic activity and a sharp reduction in home ownership if we raised interest rates.

I agree with you here. So when will rates eventually rise?

 

[JimDandy]

I would think it will be at least several years before interest rates rise significantly (several percent).

Today's Vancouver Sun has an article titled "Growing demand for resources to trigger 'tsunami' of investments". This will in turn put upward pressue on the Canadian $ which the federal government already feels is too high. As stated earlier, the only way the Canadian government can raise interest rates without undo additional upward pressure on the $ is if the American interest rates go up in tandem, and considering the state of the American economy, it is unlikely that American interest rates will go up anytime soon.

JD

 

[island-guy]

They could also try the "Quantitative Easing" approach and raise interest rates (causing the $ to go up) but then print a whole bunch of money and pass it around (causing the dollar to go down again).

Of course, it doesn't work, but that hasn't kept the US from trying it twice now so far.