Bank of Canada Interest Rates at 1.75%May 29, 2019 - 2 min read 🍵
I’m not an financial adviser, nor do I have an accounting background, but I love reading about finances and what’s going on and how it affects us.
Today, Bank of Canada maintains its interest rate at 1.75%… what does that even mean? We hear people talk about the economy on the news and sometimes I just sit and listen and feel lost. So with some Google magic, I went and found a very high level overview of what it means for inflation.
In economic terms, inflation is when there is a fall in purchasing power (value of money) and a general increase in prices.
Low interest rate at 1.75%
When the interest rate of banks are low, this stimulates spending and economic growth as more goods are being purchased. It means that people can borrow more money, go out and spend since interest rates are low. Companies can spend their money on riskier projects that might not have been profitable, thus, making new products and stimulating economic growth.
Bad news for savers
Unfortunately, this means bad news for savers because now your dollar is worth less. Why? Because when interests rates are low, consumer goods are being purchased which drives up the price of your consumer products, hence, inflation. Supply and demand, it drives supply of purchase goods down and now everything cost more!