RATES GOING UP ! CORRECTION ON THE HORIZON - FOMO - CANADIAN HOUSING CRASH 2018
103It's here BRACE yourselves !! We knew this was coming ! and thus will keep young families from leaving Canada and causing a Brain Drain ,
Stage 1 . MEDIA WARS (SPRING TIME)
STAGE 2 , THE BLAME GAME (SUMMER)
STAGE 3. THE RESTRUCTURE (WINTER 2018)
In 2018, the Bank of Canada, which is the country's central bank, raised its benchmark interest rate from 1.25% to 1.5%. This was the fourth increase since mid-2017, and it was done to counteract the effects of inflation and a strong economy. The rate hike was expected to have several effects on the Canadian economy, and its impact was closely watched by investors, economists, and policymakers.
One of the main effects of the rate hike was to make borrowing more expensive. This was because the increase in the benchmark rate led to an increase in the prime lending rate, which is the rate that commercial banks charge their most creditworthy customers. This, in turn, made it more expensive for businesses and individuals to borrow money to invest in their operations or to make big purchases like homes or cars. As a result, some economists predicted that the rate hike would slow down economic growth as people would be less likely to spend money.
Another effect of the rate hike was to strengthen the Canadian dollar. This was because higher interest rates tend to attract foreign investors who are looking for better returns on their investments. As a result, the demand for the Canadian dollar increased, causing its value to rise relative to other currencies. This, in turn, made Canadian exports more expensive, which could hurt Canadian businesses that rely on international trade.
In addition to these effects, the rate hike was also expected to have an impact on the housing market. Canada had experienced a housing boom in recent years, and many analysts were concerned that the market was becoming overheated. The rate hike was expected to cool down the market by making mortgages more expensive and discouraging people from taking on too much debt. However, it was also possible that the rate hike could lead to a decline in housing prices, which could hurt homeowners and the broader economy.
Overall, the effects of the rate hike were mixed. On the one hand, it did make borrowing more expensive and cool down the housing market. On the other hand, it also strengthened the Canadian dollar and could potentially slow down economic growth. In the months following the rate hike, the Canadian economy continued to grow, albeit at a slower rate. However, there were signs that the rate hike was having an impact on certain sectors of the economy, such as retail sales and the housing market.
One of the challenges of raising interest rates is that it can be difficult to predict how the economy will respond. While the Bank of Canada had good reasons for raising rates in 2018, the ultimate impact of the rate hike was uncertain. It was possible that the rate hike could have unintended consequences, such as causing a recession or making it harder for Canadian businesses to compete on the global stage. As a result, policymakers need to be careful when considering rate hikes and should be prepared to adjust their approach if necessary.
In conclusion, the Bank of Canada's decision to raise interest rates in 2018 had several effects on the Canadian economy. While it did make borrowing more expensive and cool down the housing market, it also strengthened the Canadian dollar and could potentially slow down economic growth. As the Canadian economy continues to evolve, policymakers will need to carefully consider the impact of interest rate changes on the economy and be prepared to adjust their approach as needed.