The Bank of Canada lowered the overnight lending rate by 0.5% to 1.0%. That is a cumulative decrease of 3.5% since December 2007! While the BoC excluded explicit language that they would lower rates further, they did not close the door to the notion either. It is largely expected that they will reduce rates another 0.5% at their next meeting on March 3.
We will have to wait and see if the Prime rate drops by the whole amount or not. It is no longer certain that will.
Historically when the BoC gets to the bottom of the rate lowering cycle they seldom stay there for longer than a couple of months. Usually through 1 meeting. A recent TD Economists report predicts that this time they will keep the overnight rate at the bottom for an extended period of time, likley into the start of 2010 when it is expected inflation starts registering on the radar. The main reason they believe this is that the Canadian economy is just starting the recession.
Whatever the time frame is that rates are held lower, the reality is that year from now they will be on the rise and there is the real possibility that the raising of rates could include some 0.5% increases initially to help inflation in check on our way out of the current slow down.
To your part to help the economy, keep spending responsibly and moderate the feeling of need to incresae your savings rate. Savings are good. All savings and no spending is bad for the economy and in the end all of us.
As an aside, a very inspirational speach by Obama on this historic day. Let' just hope that the American people embrace his message and that the rest of the world, especially the Musslim world, take pause to see if America in fact can have a foreign policy of a different colour.
Contributed by
Greg Viger
Mortgage Broker
If you are looking to Buy or to Sell real estate in Vancouver area, give me a call. My consultations are FREE. The benefits to You, may be worth a lot of money.
Call Jeff Star at 604-506-8481 or email me at jeff@jeffreystark.net
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