Economists have conflicting views on whether the central bank should cut its rate or hold steady
Bank of Canada governor Stephen Poloz is set to reveal the bank’s latest decision on interest rates on Wednesday, and many economists say a rate cut could be in the offing. (Ryan Remoritz/Canadian Press)
A year to the day after being surprised by a sudden rate cut, investors and mortgage holders will be anxiously waiting for the Bank of Canada’s next decision on interest rates.
A little after 10 a.m. ET on Wednesday, Bank of Canada governor Stephen Poloz will reveal the bank’s latest decision on interest rates. The bank can choose to raise its benchmark rate, known as the target for the overnight rate, from its current level of 0.5 per cent, lower it, or keep it the same.
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Technically, all the bank’s rate does is govern the amount that retail banks charge each other for short-term loans. But it also filters down to impact the rates that borrowers and savers get for mortgages and savings accounts at commercial banks.
Broadly speaking, the bank opts to cut its rate when it wants to juice the economy by encouraging spending and investment, and it raises its rate when it wants to pump the brakes on inflation and cool down an overheated economy.
The bank’s rate decisions are always closely watched because they have such a direct impact on the real economy. But this decision will be of particular interest, since there’s growing fear the economic uncertainty of 2015 has morphed into full-blown crisis in 2016, with oil below $30 and the loonie below 70 cents US.
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