The Bank of Canada has not only lowered its key interest rate again it has some bad news for the Canadian economy.
The trend setting interest rate was chopped another quarter point to half-a-percent
CKNW Business correspondent Michael Levy says the Bank of Canada is forecasting that the Canadian economy is technically in another recession.
“It is a recession and it is probably going to be a very mild recession. We are probably out of it already. I can tell you that the recession in the first half was a shock to the Bank of Canada.”
Levy says while the key interest rate hits half-a-percent don’t expect Canada’s big banks to follow suit.
“I don’t think so. I think Canadian banks are going to hold the line. We might see a tiny dip in the variable rate mortgage market but the banks are not going to cut into their margins by lowering their rates just because the Bank of Canada has lowered there rate.”
In response to the cut to the key interest rate TD Bank says it will reduce its prime lending rate by 10 basis points as of Thursday.
Levy says the Bank of Canada might not be done wielding its axe yet.
“We are going to have see a pick up in the second half of the year. Bank of Canada is only forecasting a meager one-percent GDP growth for all of 2015. They have been right on their forecasts so far. If they find that the numbers are coming in weaker in the second half they will cut rates again.”
The loonie took an immediate beating on the rate cut news tumbling almost a full cent in trading.