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Look out… Higher interest rates coming next year

December 15, 2009

Higher interest rates coming next year, says RBC

(Source: Canadian Press)

OTTAWA – The Royal Bank says Canadians can expect to be hit by higher interest rates in the second half of next year and in 2011.

Royal Bank economists say the Bank of Canada will be among the next group of central banks to move off floor-low rates, with the Canadian bank’s overnight rate finishing 2010 at 1.25 per cent. And RBC economists say they believe the trend-setting rate could rise to as much as 3.5 per cent in 2011.

The bank rate has been at 0.25 for most of 2009, a rate that is encouraging borrowing but also raising concerns that Canadians may be overextending themselves.

The Royal Bank says Canada has not suffered as badly as other economies in the recession, and will be among the first, after Australia and Norway, to start raising rates.

As well, the bank says that with expected growth rates of 2.6 per cent next year and 3.9 per cent in 2011, Canada will lead the G7, particularly the United States., in recovering from the deep recession.

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