The Effects of Rising Interest Rates

Content: rapscallion 1: Cover page Page 2: Essay Question 1. The brink of Canada should increase concern lay later this year Page 3: Essay Question 2. The Bank of Canada should NOT increase interest rate later this year Page 4: References Several factors that may affect the economy in the months to come should be considered by The Bank of Canada as gruelling reasons to pursue an interest rates hike. First of all, lump controls atomic number 18 necessary; the economy is facing serious inflationary pressures partially due to utmoster oil and food prices1. (CPI Feb 2012: 2.5%, Core inflation Feb 2012: 2.3%)2. Because of this phenomenon, The Bank of Canada is increasingly moving away from its inflation stone pit of 2%, putting in bump the well-functioning of the market as high inflation rates could result in high levels of uncertainty and therefore a decrease in recollective term investments in the Country. The Bank of Canada has decided to hold interest rates arguing that an interest rates increase would put down exports and would negatively affect lending climate. Consequently, it would increase the breach amongst Central Canada and provinces due to the underperformance of the latter.

However, according to some CIBC economists, such gap is not likely to be a short-lived phenomenon3 therefore sooner or later interest rates should be raised in order to mitigate the risk of high inflation rates for the whole economy. On the other(a) hand, by increasing interest rates, The Bank of Canada would stimulate nest egg and would mitigate the huge debt risk that the economy is experiencing (ratio of debt to personal disposable income a record of almost 153 per cent4). This is clearly illustrated by the real estate market, which is close to its peak according to experts5. property low interest rates, is encouraging Canadians to consume beyond their limits and to soak up too much for too long, jeopardising the whole economy`s stability. Finally, even though people may argue that financial policy initiatives... If you want to get a full essay, order it on our website: Ordercustompaper.com

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