On March 6th The Bank of Canada (BoC) held the line on the Overnight Rate which drives the Banks’ Prime Rates. The direction the BoC decides to take with rates is a direct reflection of today’s economic state; a threat of a recession or other industry-related downturn will prompt it to cut its rate in efforts to encourage liquid borrowing and stimulate the economy. Read more here
I believe it is quite possible we will see that happen later in 2019, as the Canadian economy continues its slide, suffering from softer consumer spending, an under-performing housing market, and lower-than-expected exports and business investment.
Capital Economics, a London-based research consultancy notes the recent tone from senior officials signals the bank is set to sideline plans to raise the trend-setting rate to its neutral range, between 2.5 and 3.5 per cent. ““It’s not hard to see why officials are concerned,” Brown wrote in a research note. “The available data suggest that GDP fell for the second month running in December, by 0.1 per cent. Worse still, that weakness appears to have been broad-based.”
This is good news for borrowers.