In an effort to provide economic stimulus, the Bank of Canada has lowered its key overnight interest rate by 3/4 of a percent to 1.5% in its meeting today. Since the Canadian economy has been effectively hung out to dry by the political three-ring circus in Ottawa, I’m not surprised to see such a deep cut. If Parliament can’t/won’t do anything, then it’s up to the monetary policy makers at the Bank of Canada to provide stimulus to our economy.
Citing worse-than-expected economic performance both in this country and around the globe, the Bank has admitted that we are in fact in recession, but notes that recent fiscal and monetary actions by world governments is starting to have a positive effect on financial markets, however more time is needed for things to stabilize.
The trimming of the key rate provides a 50-year low in borrowing costs in Canada.
As with any rate cut by the BoC, it remains to be seen whether or not those savings will be reflected in the Big Five banks’ prime lending rates, currently at 4.0%.
Assuming the banks adopt the Bank’s drop in lending rates, and with the recent decline in real estate prices, sidelined buyers may just decide it’s a good time to enter the marketplace.
The Bank of Canada next meets on January 20th, 2009 to set the overnight rate. You can read the full Bank of Canada news release here.
If you have any questions about mortgages or about buying or selling real estate, please call me at 250-885-0512 or use the following link to contact me.
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