With Bank of Canada’s next rate announcement scheduled for tomorrow, many experts are speculating that the bank could lower its overnight rate target by another quarter per cent to .5.
According to The Globe and Mail, “until a few days ago, financial markets saw a cut in the central bank’s key rate, to 0.5 per cent from the current 0.75 per cent, as a 50/50 coin toss; most of the economists at the country’s six big banks believed a cut was likely.”
Now, with a small decline in gross domestic product and jobs numbers, traders aren’t sure what to expect from tomorrow’s announcement.
Sherry Cooper, chief economist at Dominion Lending Centre, reportedly said in an interview with Financial Post that if Stephen Poloz, the central bank governor, “cuts rates, he will be harshly criticized for contributing to a further rise in household debt and to feeding a housing bubble in Vancouver and Toronto. If he doesn’t cut rates, he will take heat for his Pollyanna-like assertion that the economy is going to bounce back any time now.”
If BoC does lower its overnight rate target, then lenders would likely also lower mortgage interest rates, making it slightly easier to qualify for based on income (but credit standards would remain the same) for variable-rate mortgages and mortgages with a fixed rate and a term shorter than five years.