Wednesday, January 21, 2015

Bank of Canada Rate announcement to drop Prime Rate by .25%


Just when you thought that you could predict the future, the Bank of Canada announces a prime interest rate cut!

After nearly 4.5 years, the bank rate has finally changed.  I'm sure very few predicted the rate would drop. 

The prime rate is now 3/4% and the prime rate banks charge to customers is now 2.75%  The previous rate was 3%  This is unexpected news and good for anyone looking to borrow soon or having a mortgage coming up for renewal any time soon!

This is in direct contrast to all the recent announcements and many economists saying that the economy is bullish and they anticipate a rise in the rate in late 2015 or 2016, so much for the experts!

This is an excerpt below,


The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent. This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada.
Inflation has remained close to the 2 per cent target in recent quarters. Core inflation has been temporarily boosted by sector-specific factors and the pass-through effects of the lower Canadian dollar, which are offsetting disinflationary pressures from slack in the economy and competition in the retail sector. Total CPI inflation is starting to reflect the fall in oil prices.
Oil’s sharp decline in the past six months is expected to boost global economic growth, especially in the United States, while widening the divergences among economies. Persistent headwinds from deleveraging and lingering uncertainty will influence the extent to which some oil-importing countries benefit from lower prices. The Bank’s base-case projection assumes oil prices around US$60 per barrel. Prices are currently lower but our belief is that prices over the medium term are likely to be higher.
Read the entire report here:

I hope this finds you Happy and Healthy!
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A. Mark Argentino
P. Eng. Broker
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