Wednesday, January 21, 2015

Bank of Canada lowers key interest rate



It looks like the drop in oil has benefits other than lower prices at the pumps. Today, the Bank of Canada announced it will lower its target for the overnight rate by 0.25%-taking it down to 0.75%.

While oil’s decline is also expected to boost global economic growth, particularly in the United States, the good news pretty much ends there, according to the Bank. The oil price shock puts a lot of things at risk-most notably the inflation profile and financial stability. The Bank of Canada believes lower interest rates will provide insurance against these risks, as well as provide the support necessary to strengthen investment and growth, and bring the Canadian economy back to full capacity and the inflation target of 2%.

While it admits the outlook is uncertain, the Bank expects the economy to gradually strengthen in the second half of this year, and return to full capacity at the end of 2016-slightly later than its October prediction of the "second half" of 2016. This likely means interest rates won’t increase until sometime in 2016 as well.

If you have a variable mortgage, get ready to see some lower rates-although, depending on how your bank addresses interest rate changes, it may take a couple of months. I highly suggest taking this opportunity to keep your payments the same and pay down some extra principal! If your mortgage is up for renewal and you’re thinking about going variable, feel free to drop me a line to discuss whether this move is right for you.

Read the full story on the interest rate announcement here.

No comments:

Post a Comment