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12 Mar

Will the cost of money fall in 2019?

Economy

Publié par: Garth Chapman

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.”

More from Capital Economics here.

This is good news for borrowers.