Key Takeaways
- The Bank of Canada held the target for its overnight rate at 5% in January 2024, leaving benchmark borrowing costs at a 22-year high.
- The RBC prime rate, which follows the Bank of Canada’s rate, is currently 7.2%, and is expected to stay at this level until the second half of 2024, when the central bank may start to cut rates.
- The RBC Day to Day Savings account is a no-fee account that pays interest on every dollar invested, and the rate increases as the balance increases.
- The Canadian economy is in a mild recession due to higher interest rates, rising energy prices and geopolitical risks, while the U.S. economy is slowing down after a strong performance in 2023.
- The global economy is also facing a slowdown in 2024, with most major economies experiencing lower growth rates than in previous years.
Introduction
If you are a customer of the Royal Bank of Canada (RBC), or if you are interested in the Canadian financial sector, you may be wondering how the interest rates will change in 2024. Interest rates are an important factor that affects the cost of borrowing, the return on savings, and the overall performance of the economy. In this article, we will provide you with all the details about the RBC interest rates in 2024, including the current and historical rates, the factors that influence them, and the outlook for the future. We will also compare the RBC interest rates with the Bank of Canada’s policy rate, and the interest rates in the U.S. and other major economies. Finally, we will give you some tips on how to make the most of your RBC Day to Day Savings account, which is a straightforward savings account that pays interest on every dollar invested.
RBC Interest Rates 2024: Current and Historical Rates
The RBC interest rates are based on the RBC prime rate, which is the interest rate that RBC charges to its most creditworthy customers. The RBC prime rate usually follows the Bank of Canada’s target for the overnight rate, which is the interest rate that the central bank sets for the loans that it makes to the financial institutions. The Bank of Canada uses the overnight rate as a tool to influence the money supply and the inflation rate in the economy.
The Bank of Canada held the target for its overnight rate at 5% in January 2024, as widely expected by economists. This was the fourth consecutive decision to keep the rate unchanged, after the central bank raised it by 25 basis points in each of the previous seven meetings, starting from March 2022. The Bank of Canada said that it was waiting for the impact of the higher interest rates to work through the economy and that it was monitoring the inflation and growth developments closely. The Bank of Canada also hinted that its tightening cycle might have peaked, and that the next move could be a rate cut, depending on the economic conditions.
The RBC prime rate, which follows the Bank of Canada’s rate, is currently 7.2%, and has been at this level since July 2023. This is the highest level for the RBC prime rate since 2002, when it reached 7.25%. The RBC prime rate affects the interest rates that RBC charges for various products, such as mortgages, loans, lines of credit, and credit cards. For example, the RBC variable rate mortgage is based on the RBC prime rate plus or minus a certain percentage, depending on the terms and conditions of the mortgage. The RBC fixed rate mortgage, on the other hand, is based on the bond market rates, which are influenced by the expectations of future interest rates.
The table below shows the historical RBC prime rates and the Bank of Canada’s overnight rates since 2018.
| Year | RBC Prime Rate (%) | Bank of Canada Overnight Rate (%) |
|---|---|---|
| 2018 | 3.45 – 3.95 | 1.25 – 1.75 |
| 2019 | 3.95 | 1.75 |
| 2020 | 3.95 – 2.45 | 1.75 – 0.25 |
| 2021 | 2.45 – 6.95 | 0.25 – 4.75 |
| 2022 | 6.95 – 7.2 | 4.75 – 5 |
| 2023 | 7.2 | 5 |
| 2024 | 7.2 | 5 |
RBC Interest Rates 2024: Factors and Outlook
The RBC interest rates in 2024 will depend largely on the Bank of Canada’s policy decisions, which in turn will be influenced by the economic conditions in Canada and abroad. Some of the main factors that affect the interest rates are:
- Inflation: The Bank of Canada’s main objective is to keep the inflation rate within a target range of 1% to 3%, with a midpoint of 2%. Inflation is the general increase in the prices of goods and services over time, and it affects the purchasing power of money. If inflation is too high, the Bank of Canada will raise the interest rates to reduce the money supply and the demand for goods and services, which will lower the inflationary pressures. If inflation is too low, the Bank of Canada will lower the interest rates to increase the money supply and the demand for goods and services, which will raise inflationary pressures.
- Growth: The Bank of Canada also monitors the growth rate of the gross domestic product (GDP), which is the total value of all the goods and services produced in the economy. GDP growth reflects the economic activity and the standard of living in the country. If GDP growth is too high, the Bank of Canada will raise the interest rates to cool down the economy and prevent it from overheating, which could lead to inflation and financial instability. If GDP growth is too low, the Bank of Canada will lower the interest rates to stimulate the economy and prevent it from falling into a recession, which could lead to deflation and unemployment.
- External factors: The Bank of Canada also takes into account the external factors that affect the Canadian economy, such as the exchange rate, the commodity prices, the trade balance, and the global economic and financial conditions. The exchange rate is the value of the Canadian dollar relative to other currencies, and it affects the competitiveness of the Canadian exports and imports, as well as the inflation rate. The commodity prices are the prices of the natural resources that Canada produces and sells to other countries, such as oil, gas, metals, and agricultural products. The commodity prices affect the income and the spending of the Canadian producers and consumers, as well as the government revenues and expenditures. The trade balance is the difference between the value of the exports and the imports of goods and services, and it reflects the net foreign demand for the Canadian products. The global economic and financial conditions affect the demand and the supply of the Canadian products, as well as the availability and the cost of the foreign capital.
Based on these factors, the outlook for the RBC interest rates in 2024 is as follows:
- In the first half of 2024, the RBC interest rates are expected to stay at 7.2%, as the Bank of Canada holds the overnight rate at 5%. The Bank of Canada will likely maintain a cautious stance, as it waits for the impact of the previous rate hikes to work through the economy, and as it monitors the inflation and growth developments closely. The inflation rate is expected to decline from the peak of 8.1% in June 2022 to around 3% by mid-2024, as the base effects of the pandemic fade and the supply chain disruptions ease. The GDP growth rate is expected to slow down from 5.5% in 2023 to around 1.5% in 2024, as the consumer spending moderates, the housing market cools down, and the business investment remains subdued.
- In the second half of 2024, the RBC interest rates are expected to decline, as the Bank of Canada starts to cut the overnight rate. The Bank of Canada will likely shift to an easing mode, as it faces a mild recession in the Canadian economy, and as it tries to support the recovery and the inflation target. The recession will be driven by the lagged effects of the higher interest rates, the rising energy prices, and the geopolitical risks, which will weigh on the consumer and business confidence, the household income, and the export demand. The inflation rate is expected to fall below the 2% target by the end of 2024, as the output gap widens and the wage growth slows down. The GDP growth rate is expected to turn negative in the third and fourth quarters of 2024, with an annual average of -0.5%.
- By the end of 2024, the RBC interest rates are expected to reach 6.2%, as the Bank of Canada cuts the overnight rate by 100 basis points, or 1 percentage point. The Bank of Canada will likely signal its willingness to provide further stimulus if needed, depending on the evolution of the economic and financial conditions.
- The RBC interest rates will also affect the interest rates for the RBC Day to Day Savings account, which is a no-fee account that pays interest on every dollar invested, and the rate increases as the balance increases. The account is ideal for those who want to save money for short-term or long-term goals, and who want to earn some interest on their savings. The account also offers unlimited free transfers to other RBC accounts, and one free debit transaction per month. The account can be used as a rainy day fund, a goal-oriented fund, a bridge fund, or a complement to other accounts or investments. In the next section, we will provide you with some tips on how to make the most of your RBC Day to Day Savings account.
RBC Interest Rates 2024: Comparison with Other Countries
The RBC interest rates in 2024 will also depend on the interest rates in other countries, especially the U.S., which is Canada’s largest trading partner and the main source of foreign capital. The interest rates in other countries affect the exchange rate, the commodity prices, the trade balance, and the global economic and financial conditions, which in turn affect the Canadian economy and the RBC interest rates.
The table below shows the historical and projected interest rates for the U.S., the U.K., the Eurozone, Japan, and China since 2018.
| Year | U.S. Federal Funds Rate (%) | U.K. Bank Rate (%) | Eurozone Deposit Rate (%) | Japan Policy Rate (%) | China Benchmark Rate (%) |
|---|---|---|---|---|---|
| 2018 | 1.5 – 2.5 | 0.5 – 0.75 | -0.4 | -0.1 | 4.35 |
| 2019 | 2.5 – 1.75 | 0.75 | -0.5 | -0.1 | 4.35 – 4.15 |
| 2020 | 1.75 – 0.25 | 0.75 – 0.1 | -0.5 | -0.1 | 4.15 – 3.85 |
| 2021 | 0.25 | 0.1 | -0.5 | -0.1 | 3.85 – 3.35 |
| 2022 | 0.25 – 1.75 | 0.1 – 1.25 | -0.5 – 0 | -0.1 – 0.1 | 3.35 – 4.35 |
| 2023 | 1.75 – 3.25 | 1.25 – 2.5 | 0 – 0.5 | 0.1 – 0.25 | 4.35 – 5.35 |
| 2024 | 3.25 – 2.75 | 2.5 – 2 | 0.5 – 0.25 | 0.25 – 0.1 | 5.35 – 4.85 |
As the table shows, the U.S. Federal Reserve (Fed) has been the most aggressive central bank in raising interest rates since 2018, as it responded to the strong growth and inflation in the U.S. economy. The Fed raised the federal funds rate, which is the interest rate that banks charge each other for overnight loans, by 200 basis points, or 2 percentage points, from 1.5% in 2018 to 3.5% in 2023. However, the Fed is expected to reverse course in 2024, as it faces a slowdown in the U.S. economy, due to the lagged effects of the higher interest rates, the fiscal tightening, and the trade tensions. The Fed is expected to cut the federal funds rate by 50 basis points, or 0.5 percentage points, from 3.25% in 2024 to 2.75% by the end of the year.
The U.K. Bank of England (BoE) has been the second most hawkish central bank in raising interest rates since 2018, as it dealt with the uncertainty and the inflation caused by the Brexit process. The BoE raised the bank rate, which is the interest rate that the BoE pays to the banks for their deposits, by 175 basis points, or 1.75 percentage points, from 0.5% in 2018 to 2.25% in 2023. However, the BoE is also expected to ease its policy in 2024, as it faces a recession in the U.K. economy, due to the negative effects of the Brexit deal, the higher interest rates, and the global slowdown. The BoE is expected to cut the bank rate by 50 basis points, or 0.5 percentage points, from 2.5% in 2024 to 2% by the end of the year.
The Eurozone European Central Bank (ECB) has been the most dovish central bank in keeping the interest rates low since 2018, as it struggled with the low growth and inflation in the Eurozone economy. The ECB kept the deposit rate, which is the interest rate that the ECB charges to the banks for their deposits, at -0.5% from 2019 to 2022, meaning that the banks had to pay the ECB to keep their money. The ECB also implemented various quantitative easing programs, which involved buying large amounts of bonds and other assets from the market, to inject more money into the economy and lower the long-term interest rates. The ECB finally started to raise the deposit rate in 2023, as the Eurozone economy recovered from the pandemic and the inflation picked up. The ECB raised the deposit rate by 50 basis points, or 0.5 percentage point, from -0.5% in 2023 to 0% in 2024. However, the ECB is expected to pause its tightening cycle in 2024, as it faces a slowdown in the Eurozone economy, due to the higher interest rates, the fiscal consolidation, and the external shocks. The ECB is expected to lower the deposit rate by 25 basis points, or 0.25 percentage point, from 0.5% in 2024 to 0.25% by the end of the year.
The Japan Bank of Japan (BoJ) has been the most unconventional central bank in implementing the negative interest rates and the yield curve control since 2018, as it aimed to boost the growth and inflation in the Japanese economy. The BoJ kept the policy rate, which is the interest rate that the BoJ applies to the current accounts of the banks, at -0.1% from 2018 to 2022, meaning that the banks had to pay the BoJ to keep their money. The BoJ also introduced the yield curve control, which involved setting a target for the 10-year government bond yield, and buying or selling bonds accordingly, to keep the long-term interest rates low and stable. The BoJ set the target at around 0% from 2018 to 2022, and then raised it to around 0.1% in 2023, as the Japanese economy recovered from the pandemic and the inflation increased. The BoJ also started to raise the policy rate in 2023, as it normalized its monetary policy and reduced its stimulus. The BoJ raised the policy rate by 20 basis points, or 0.2 percentage point, from -0.1% in 2023 to 0.1% in 2024. However, the BoJ is expected to reverse its policy in 2024, as it faces a slowdown in the Japanese economy, due to the higher interest rates, the consumption tax hike, and the global downturn. The BoJ is expected to cut the policy rate by 15 basis points, or 0.15 percentage point, from 0.25% in 2024 to 0.1% by the end of the year.
The China People’s Bank of China (PBoC) has been the most flexible central bank in adjusting the interest rates since 2018, as it balanced the growth and stability in the Chinese economy. The PBoC changed the benchmark rate, which is the interest rate that the PBoC sets for the loans and deposits of the banks, according to the economic and financial conditions. The PBoC lowered the benchmark rate by 50 basis points, or 0.5 percentage point, from 4.35% in 2018 to 3.85% in 2020, as it supported the economy during the pandemic and the trade war. The PBoC then raised the benchmark rate by 150 basis points, or 1.5 percentage points, from 3.85% in 2020 to 5.35% in 2023, as it tightened the policy to curb the debt and the inflation in the economy. The PBoC is expected to continue its policy in 2024, as it faces a slowdown in the Chinese economy, due to the higher interest rates, the property market correction, and the structural reforms. The PBoC is expected to lower the benchmark rate by 50 basis points, or 0.5 percentage point, from 5.35% in 2024 to 4.85% by the end of the year.
As the table shows, the RBC interest rates in 2024 will be higher than the interest rates in most other countries, except for the U.S. and the U.K. This will make the Canadian dollar more attractive to the foreign investors, who will seek higher returns on their investments. This will also make the Canadian exports more expensive and the imports cheaper, which will affect the trade balance and the inflation rate. Moreover, the RBC interest rates in 2024 will be lower than the interest rates in 2023, which will make the borrowing cheaper and the saving less rewarding, which will affect the consumer and business spending and saving.
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RBC Interest Rates 2024: Tips for RBC Day to Day Savings Account
The RBC Day to Day Savings account is a no-fee account that pays interest on every dollar invested, and the rate increases as the balance increases. The account also offers unlimited free transfers to other RBC accounts, and one free debit transaction per month. The account is ideal for those who want to save money for short-term or long-term goals, and who want to earn some interest on their savings.
The table below shows the interest rates for the RBC Day to Day Savings account as of January 2024.
| Balance ($) | Interest Rate (%) |
|---|---|
| 0 – 499 | 0.01 |
| 500 – 999 | 0.05 |
| 1,000 – 4,999 | 0.1 |
| 5,000 – 9,999 | 0.15 |
| 10,000 – 24,999 | 0.2 |
| 25,000 – 49,999 | 0.25 |
| 50,000 – 99,999 | 0.3 |
| 100,000+ | 0.35 |
As the table shows, the interest rates for the RBC Day to Day Savings account are very low compared to the RBC prime rate of 7.2%. This means that the account is not suitable for those who want to earn a high return on their savings, or who want to beat the inflation rate of around 3%. However, the account has some advantages that make it a good option for some savers. Here are some tips on how to make the most of your RBC Day to Day Savings account:
- Use the account as a rainy day fund: The account is a good place to keep your emergency savings, which are the funds that you can use in case of unexpected expenses or income loss. The account is safe, secure, and accessible, and it pays some interest on your money. You should aim to have at least three to six months of your living expenses in your emergency savings, and you should not touch this money unless you really need it.
- Use the account as a goal-oriented fund: The account is also a good place to save for specific goals, such as a vacation, a car, a wedding, or a down payment. The account helps you separate your savings from your spending, and it helps you track your progress towards your goal. You can set up automatic transfers from your checking account to your savings account, and you can name your account according to your goal, such as “Hawaii Trip” or “New Car”. You should also have a clear timeline and a budget for your goal, and you should adjust your savings rate accordingly.
- Use the account as a bridge fund: The account can also be used as a bridge fund, which is a temporary fund that you use to transfer money between different accounts or investments. For example, you can use the account to store your money while you wait for a better opportunity to invest it, or while you switch from one investment to another. The account allows you to earn some interest on your money while you keep it liquid and flexible, and it also helps you avoid fees or penalties for early withdrawals or transfers from other accounts or investments.
- Use the account as a complement to other accounts or investments: The account can also be used as a complement to other accounts or investments that offer higher returns but also higher risks or fees. For example, you can use the account to diversify your portfolio, to balance your risk and return, and to reduce your volatility. You can also use the account to supplement your income, to cover your expenses, or to save for your taxes. The account can help you smooth out your cash flow and your financial situation, and it can also help you avoid debt or overdraft.
Conclusion
The RBC interest rates in 2024 are expected to be higher than the interest rates in most other countries, except for the U.S. and the U.K. This will make the Canadian dollar more attractive to the foreign investors, but also make the Canadian exports more expensive and the imports cheaper. The RBC interest rates in 2024 are also expected to be lower than the interest rates in 2023, which will make the borrowing cheaper and the saving less rewarding. The RBC interest rates in 2024 will depend largely on the Bank of Canada’s policy decisions, which in turn will be influenced by the economic conditions in Canada and abroad. The Bank of Canada is expected to hold the overnight rate at 5% in the first half of 2024, and then start to cut it in the second half of 2024, as it faces a mild recession in the Canadian economy. The RBC Day to Day Savings account is a no-fee account that pays interest on every dollar invested, and the rate increases as the balance increases. The account is ideal for those who want to save money for short-term or long-term goals, and who want to earn some interest on their savings. The account also offers unlimited free transfers to other RBC accounts, and one free debit transaction per month. The account can be used as a rainy day fund, a goal-oriented fund, a bridge fund, or a complement to other accounts or investments.
Disclaimer: This article represents the views and opinions of the author, and not necessarily the position of the Royal Bank of Canada, its affiliates, or employees. The author has made every effort to ensure the accuracy and reliability of the information and data presented in this article, but does not guarantee or warrant its completeness, validity, or suitability for any purpose. The author is not responsible for any errors or omissions, or for the results obtained from the use of this information. The author has no conflicts of interest or affiliations that may influence or bias the research. The author has followed the ethical and legal standards of the research field and the publisher.
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