One thing is certain: 1% for the overnight rate won’t get it done
Of course, few of us are large financial institutions making multimillion-dollar overnight loans to each other. So overnight interest is of little practical interest. Luckily, the Bank of Canada also tracks the “weekly effective household interest rate,” which is a mix of various rates, including. It’s currently at 3.64 per cent. This week last year it was at 2.56 per cent. So it’s up 108 basis points or a little over one percentage point.
But there’s also a thing called the inflation rate. Last March it was running at 2.2 per cent, just a tad above the Bank of Canada’s target for it. This March it was at 6.7 per cent — many, many tads above target. So: interest rates have gone up a little but inflation has gone up a lot. What that means is that despite the bank’s monetary tightening real interest rates have gone. “Real interest rates” sounds deeply philosophical. “What does it mean to be ‘real’?, the metaphysicist asked.” In fact, real interest rates are simply regular interest rates adjusted for inflation — though the idea is easier than the actual calculation.
Instead, the quick and sloppy method for calculating real interest rates is to subtract the inflation rate. Last spring, using the numbers mentioned above, an interest rate of 2.56 per cent, minus inflation of 2.2 per cent, meant a real interest rate of 0.46 per cent. This spring, an interest rate of 3.64 per cent minus inflation of 6.7 per cent gives a real interest rate of -3.06 per cent.
Canada Latest News, Canada Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Asian shares fall amid interest rate, earnings worriesAsian shares declined Monday after U.S. stocks ended last week on a tumble as global markets' expectations for higher interest rates continued to set the tone.
Read more »
Key interest rate could soon go up another half percentage point, central bank says | National NewswatchNational Newswatch: Canada's most comprehensive site for political news and views. Make it a daily habit.
Read more »
Key interest rate could soon go up another half percentage point, central bank says
Read more »
Bank of Canada mulling another half-percentage-point rate hike, Macklem saysThe Bank of Canada will likely consider another half\u002Dpercentage\u002Dpoint interest rate increase in early June, Governor Tiff Macklem said.
Read more »
Bank of Canada will consider a 50-basis-point rate hike in June, Tiff Macklem says‘We are committed to using our policy interest rate to return inflation to target and will do so forcefully if needed,,’ the BoC governor told a federal finance committee Monday
Read more »
Rising rates could bring multi-billion-dollar windfall to Canadian companies with big DB pension plansRising rates could bring multi-billion-dollar windfall to Canadian companies with big DB pension plans BatPost
Read more »