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Why Interest Rates Matter for Canadians

Interest rates are the single most powerful lever in Canada's economy.  When the Bank of Canada adjusts its policy rate, the effects reach every household—from the cost of carrying a mortgage to the return on a savings account. With rates currently at 2.25% and significant uncertainty ahead, understanding how rates work has never been more important for your finances. What Is the Bank of Canada's Policy Rate? The Bank of Canada sets the overnight policy rate—the interest rate at which major banks lend money to each other. This rate serves as a benchmark that influences borrowing and lending costs across the entire economy. When the Bank raises or lowers this rate, commercial banks adjust their prime rates accordingly, which directly affects the rates you pay on mortgages, lines of credit, and other loans. The Bank's primary goal is to keep inflation near its 2% target. When inflation runs too hot, the Bank raises rates to cool spending. When the economy slows, it cuts rates...
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S&P/TSX Composite Closes Lower Amid Broader Losses

Canada’s main stock index, the S&P/TSX composite, closed lower on Friday, echoing the trend in U.S. markets. Despite earlier gains, the S&P/TSX composite index ended down 66.37 points at 21,875.79. The decline was driven by weakness in energy and industrials sectors.

Statistics Canada reported that real gross domestic product (GDP) grew 0.3% in April, but the early read for May showed growth slowing to 0.1% for the month. Consumers in Canada appear to be pulling back, impacted by higher interest rates over the past two years. Portfolio manager Hadiza Djataou noted that consumption is taking a hit, influencing stock performance.

In New York, the Dow Jones industrial average was down 45.20 points at 39,118.86, the S&P 500 index dropped 22.39 points to 5,460.48, and the Nasdaq composite fell 126.08 points to 17,732.60. The U.S. Federal Reserve’s preferred inflation gauge indicated a 2.6% rise in consumer prices for May, easing from April’s 2.7% reading.

The Canadian dollar traded at 73.06 cents US, and while Canada’s GDP data didn’t significantly impact interest rate expectations, Djataou anticipates further pressure on the loonie due to diverging economic trajectories between Canada and the U.S.


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