When your wrong your wrong. Yesterday, I predicted with confidence, from Robert Floris’s Mortgage Architects office in Hamilton, that there was no way the interest rates would be lowered by the Bank of Canada. Needless to say, I was dead wrong. They haven’t moved in 4 years. The effect of the mortgage rate discount will allow current mortgage holders in variable rates to enjoy a greater amount of savings. This is very good for consumers and for the continued housing market in the Hamilton area. What this is telling me though, is that the Bank of Canada is really worried about the economy. As described earlier, in my previous Robert Floris articles, low oil prices will lead to lower revenues for the government as well as some sharp job losses in key areas and unfortunately a weaker Canadian dollar. My hope for the Hamilton housing sector is that we continue to grow but at a more gradual and steady pace.

Robert Floris is a mortgage broker with Mortgage Architects in Hamilton, ON

 

 

Bank of Canada shocks markets with cut in key interest rate

Central bank sees 2015 economic growth of 2.1%, down from earlier forecast of 2.4%

 

The Bank of Canada surprised markets today by cutting its key overnight lending rate by a quarter of a percentage point, citing the economic threat posed by plunging oil prices.

Bank of Canada governor Stephen Poloz will hold a news conference at 11:15 a.m. ET Wednesday from Ottawa to comment on the bank’s rate cut as well as the lowered growth outlook.

The overnight rate, which moves down to 0.75 per cent, had been at one per cent since September 2010.

Virtually no economists had been predicting a rate cut.

“The large decline in oil prices will weigh significantly on the Canadian economy,” the Bank of Canada said in its quarterly monetary policy report.

Bank of Canada governor Stephen Poloz made a surprise announcement Wednesday morning – cutting the key interest rate by a quarter of a percentage point, from the one per cent it had been at since September 2010. (The Canadian Press)

“Given the speed and magnitude of the oil-price decline, there is substantial uncertainty around the likely level for oil prices and their impact on the economic outlook for Canada.”

Oil prices have plunged to less than $50 US a barrel from more than $100 US in June last year.

In the wake of the rate cut, the loonie plunged more than 1.20 cents to 81.39 cents US — its lowest level since late April 2009.

Lowered outlook

The central bank also scaled back its forecast for the country’s economic growth this year. It now sees 2015 growth of 2.1 per cent, down from 2.4 per cent.

“The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar and the Bank [of Canada’s] monetary policy response,” it said.

The central bank says real GDP growth will be just 1.5 per cent in the first half of this year and will pick up in the second half. For 2015 as a whole, it sees economic growth of 2.1 per cent, rising to 2.4 per cent in 2016.