BoC rate decision comes in

by Justin da Rosa15 Jul 2015
The Bank of Canada has lowered its overnight rate to 1/2 per cent.

“The lower outlook for Canadian growth has increased the downside risks to inflation. While vulnerabilities associated with household imbalances remain elevated and could edge higher, Canada’s economy is undergoing a significant and complex adjustment,” the central bank said in a statement. “Additional monetary stimulus is required at this time to help return the economy to full capacity and inflation sustainably to target.”

Prior to the decision economists were split on what move the central bank would make, with 16 of 29 economists polled by Bloomberg forecasting the central bank would slash the overnight rate by a quarter point to 0.5 per cent.

The market was rife with speculation building up to the announcement, with analysts suggesting a rate drop would have little economic impact because rates were already extremely low.

Brokers suggested a slight lowering of rates would have little effect, except to perhaps attract stragglers to the enticing low rate environment – assuming, of course, that lenders follow the Bank of Canada’s lead.

The Bank of Canada expects real GDP to grow by just over one per cent this year and about 2 ½ per cent in 2016.

“The Bank’s estimate of growth in Canada in 2015 has been marked down considerably from its April projection. The downward revision reflects further downgrades of business investment plans in the energy sector, as well as weaker-than-expected exports of non-energy commodities and non-commodities,” the Bank said. “Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation.”



  • by Grammar Check 7/15/2015 10:51:50 AM

    I'm sure you meant "rife" with speculation...

    rife (raɪf)
    adj (postpositive)
    1. of widespread occurrence; prevalent or current: rumour was rife in the village.
    2. very plentiful; abundant

  • by Les Holdway 7/15/2015 12:13:53 PM

    As a Broker I would say the Rate move is an unnecessary show piece. This will entice the few remaining buyer persons into the Vancouver and Toronto markets that aren't currently over leveraged. What happens when 1/2 a point goes to 2, 4 or six percent or worse? Probably a third of the market will be critically encumbered.
    Why would the market turn? What if Greece doesn't perform a year from now. Just the government debt alone would cause a loss of 300 Billion to the marketplace. In 2008 it was Countrywide's 500,000 defaulting mortgages that started a predictable snowball of defaults throughout the US and international markets and a giant printing of paper currency to counteract the shortfall of available funds to the marketplace, which although paring down is still going on today
    What happens to cash flow if lets say Iran's oil re entering the market drops international oil markets to $40?
    Or war in Ukraine? etcetera
    Whats missing in Canada is not a quarter point on the rates but rather a strategy for small and medium size business to enter the international trade world. I have been promoting this cause since '97 when it became clear Free Trade has thrust Canadian Business into an expand or die situation. Unfortunately many small and medium sized businesses consumed with the Business of doing Business have succumbed by default to the latter.
    If you have ANY doubt about what I am saying take a look around Southern Ontario where a significant amount of industrial activity surrounds tearing down manufacturing plants for their scrap value.
    If the government truly wants to be helpful why not investigate why a litre of gas in Ontario has crept back up to 1.10 from 70 cents even though a barrel of oil remains at 50 plus dollars.
    Or have an aggressive international competition plan for small and medium sized business
    Rescom Real Estate

  • by 7/15/2015 12:46:44 PM

    It will be years before we see 6% rates again as nation and global economies just aren't strong enough to support them. As for southern Ontario Les, it was the unions and the greedy employees that closed all the plants I speak of Chatham specifically, no need for any money wasting investigations. I know I worked in 3 of them 1 food and 2 auto plants. As far as paying $1.10 per liter for fuel that is a bargain, we are paying $1.39 in BC. And small businesses like all others need to adapt to the market and trends or perish, simple really.

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