What commonly influences interest rates linked to GICs?

Interest rates linked to Guaranteed Investment Certificates (GICs) are primarily influenced by changes in other interest rates, such as the prime rate. The prime rate, which is typically set by banks and influenced by central bank rates, reflects the overall cost of borrowing in the economy. Changes in these benchmark rates impact financial institutions' lending and borrowing practices, altering the rates they offer on GICs to remain competitive and profitable.

When the prime rate increases, financial institutions often raise their GIC rates to attract investors seeking better returns, aligning their offerings with overall market conditions. Conversely, a decrease in the prime rate generally leads to lower GIC rates, as institutions adjust to reduced borrowing costs. This relationship between GIC rates and the prime rate underscores how these interest rates react to changes in the broader financial landscape, making it a key factor in determining the yield on GICs.