Rate Dropped to 3/4 Per Cent
The Bank of Canada announced today 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.
There has been no change to the Bank of Canada rate since September 2010 until this move today.
2015 has started off with quite a bit of speculation as to what rates would be doing throughout the year. Just a few weeks ago the media was reporting that we can expect to see rates going up because of the broad recovery of the US economy.
However most recently Morgan Stanley was quoted in the National Post as saying “Don’t look for another interest rate hike for two more years; in fact, there is a one in three chance the Bank of Canada will actually cut rates before the end of this year” Morgan Stanley predicts.
Well it looks like the one beat the three today – forget the end of the year, the Bank of Canada has already lowered interest rates because of the drop in oil prices.
The next scheduled Bank of Canada date for announcing the overnight rate target is March 4th, 2015.
If you have questions about what this rate announcement means and how it impacts you, please don’t hesitate to contact me anytime! We will know shortly if the banks respond and drop the Prime Lending Rate to 2.75% as well which would impact variable rate holders.
Here is a copy of the full Bank of Canada announcement.