Briefing

Bank of Canada holds interest rates, cuts growth outlook

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The central bank held its interest rate at 1.75 per cent on Wednesday, saying the economy needs to maintain a low rate. It cited a sluggish global economy and weak domestic business activity linked to trade tensions between China and the U.S. and low investment in the oil sector as reasons for holding the rate. The bank said Canada’s economy will grow 1.2 per cent this year, down from an estimated 1.7 per cent three months ago. It expects the economy to grow by 2 per cent next year. The Canadian dollar dropped half a cent on the news to 74 cents on the U.S. dollar. (Globe and Mail)

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Talking point: The news should reduce some pressure on home-owners who were anticipating a hike on their variable rate mortgages. It also signals to homebuyers that fixed rate mortgages should stay the same at least until the central bank revists rates in six weeks, and potentially much longer. Economists, including Krishen Rangasamy and Paul-Andre Pinsonnault of the Bank of Canada, are now anticipating rate cuts if the economy doesn’t improve in the latter half of the year. The cuts could help stimulate Canada’s economy—by keeping mortgages and savings accounts rates low, and thus encouraging spending—in the face of a long-predicted slump.