Bank of Canada lowers interest rate again!

by | Jan 21, 2015 | Interest rates

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Today, the Bank of Canada announced that it’s lowering its overnight rate target by ¼ of 1 percentage point to 0.75%. This effectively lowers the bank rate to 1% and the deposit rate to 0.5%. Unsurprisingly, this decision was in response to recent reduction in oil prices, which negatively affects growth and inflation in Canada.
Analysts predict that oil’s decline will boost global economic growth, especially in the United States. Despite the negative effect predicted in Canada, we’ve seen increased foreign demand, stronger exports, improved business confidence and investment, and employment growth. At the same time, it’s unclear how low oil prices will affect these markers in the longer term.
Naturally, business investment in the energy sector will begin to fall, and a weaker trade position will ultimately mean lower income and wealth, hindering growth of domestic demand.
Even so, the Bank of Canada expects a stronger US economy, a weaker Canadian dollar, and its own monetary policy will mitigate the negative impact of low oil prices. While GDP may slow down to about 1.5%, it could average around 2.1% for the year in 2015 and rise to 2.4% next year.
The lower interest rate is great for home buyers! Whether you’re buying your first home, looking at an investment property, upgrading to a bigger home, or renewing your mortgage, now is the perfect time to talk to us. We can help you get a great deal on a new mortgage!