January 21, 2015
By: Louise Turch
The Bank of Canada surprised markets today by decreasing its key overnight lending rate by a quarter of a percent.
This drastic move comes from the economic threat posed by plunging oil prices. The fact that many economists did not forecast the prediction of the rate cut contributes to the overall sense of astonishment.
"The drop in oil prices is unambiguously negative for the Canadian economy," Bank of Canada governor Stephen Poloz said in a morning news conference. "Canada's income from oil exports will be reduced, and investment and employment in the energy sector are already being cut."
The overnight rate has been at one percent since September 2010. Now down to 0.75 per cent, the cut will of course result in lower interest rates for any loans that are dependent on hovering with prime rates, including variable rate mortgages and lines of credit.
For now, at least the BC housing market should continue to benefit from low and now likely lower mortgage rates.