Who controls interest rates?

The Bank of Canada is responsible for controlling interest rates within the country. The goal is to keep inflation low by adjusting interest rates as necessary to ensure stable pricing, which helps keep Canadians investing and working without the worry of fluctuating rates. The Bank of Canada will raise or lower the interest rate in response to inflation; when inflation is high (as it is now), the Bank will raise the interest rate to curb borrowing and spending to lower inflation. On the other end, if inflation is low, the Bank will lower interest rates to stimulate borrowing and spending and reinvigorate the economy.

How often are interest rates adjusted?

The Bank of Canada announces its decision on interest rates on eight scheduled dates per year. The decision is announced via a press release at 10:00 am on each of the pre-selected dates. The goal of adjusting interest rates is to combat inflation; if inflation is too high, the Bank will elect to increase interest rates to slow down borrowing and spending. If inflation is low, the Bank will lower interest rates to stimulate the economy by lowering the cost of borrowing and making mortgages and loans more accessible to the public.

How is inflation affected by rising interest rates?

Rising interest rates are meant to curb inflation. When interest rates are raised, it becomes more expensive to borrow money. Homeowners with variable-rate mortgages especially feel the pinch as their mortgage rates can increase dramatically. As the cost of borrowing increases, consumers generally spend less and save more. The goal is that by increasing interest rates, manufacturers and retailers will curb rising prices or lower their prices accordingly to increase sales, which reduces inflation.

Gabriel Sigler

Born and raised in Montreal, Que., Gabriel is a graduate of Concordia University’s Journalism department, and the founder and editor-in-chief of Bad Feeling Magazine. For WealthRocket, he specializes in credit card reviews. He has also written extensively for Bad Feeling, along with the Toronto Star, and Cult MTL.