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Stable interest rates good for the economy Interest rates remain at historic lows which is the ideal situation for growing the Canadian economy, says Ladysmith & District Credit Union (LDCU) CEO John de Leeuw. “While rates have remained at historic lows for several years now, they’ve been stable,” de Leeuw said. “Stable rates are the best thing for our economy. Quickly rising or quickly declining rates play havoc on our economic system.” The rates have also meant historically low margins for financial institutions, with only a recent bump in mortgage rates. De Leeuw said the domestic economy continues to have the most influence on the Bank of Canada. The Bank’s key interest rate remains at 0.5 per cent and the latest report projects Canada’s GDP growth in 2017 and 2018 will be 2.1 per cent. South of the border, the U.S. economy has been booming in more recent months leading to a quarter per cent interest rate hike to 0.75 per cent late
last year. The Canadian economy, by comparison, is not operating at the same capacity as the U.S. “There is room for it to continue to grow... we’re a raw material economy so exports is what drives us,” de Leeuw said. The Bank of Canada would instead like to see the value of the Canadian dollar drop in order to make domestic exports more attractive, he added. “When the interest rate in the U.S. goes up their dollar gets stronger,” he said. As a result, the Canadian dollar is weakened and the Bank would look to cut interest rates, if at all. “They would make that move reluctantly, I believe, but all of the talk now is that there’s not going to be a rate increase before 2018,” de Leeuw noted. “The best possible outcome we could have for a situation that our country has never seen is for rates to up slowly, giving people, businesses and financial institutions times to adjust.”
Ladysmith & District Credit Union CEO John de Leeuw predicts that the Bank of Canada won’t raise interest rates before 2018 and any future increases will most likely be small and gradual. FILE PHOTO
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