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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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Loonie Plummets to 2020 Lows Amid Trump's Tariff Threat

 

The Canadian dollar, commonly known as the "loonie," has fallen to its lowest level since May 2020 following threats from U.S. President-elect Donald Trump to impose tariffs on Canadian goods. Trump announced on social media that he plans to impose a 25% tariff on all products from Canada and Mexico until both countries address issues related to drug trafficking and illegal immigration.

The loonie dipped below 71 cents US in early trading on Tuesday, reaching 70.87 cents US, down from 71.53 cents US the previous day. This decline is attributed to increased trade tensions and concerns over the Canadian economy, which has already been under pressure due to recent interest rate cuts by the Bank of Canada.

Economists are divided on whether Trump will follow through with his threats, with some suggesting that the announcement may be a negotiating tactic. However, the uncertainty has already had a significant impact on the loonie and could affect Canadian businesses and consumers if the tariffs are implemented.

The situation remains fluid, and Canadian officials are closely monitoring developments to determine the best course of action.



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