|In a move that surprised economic analysts, Bank of Canada Governor Stephen S. Poloz has announced a 0.25 percentage point cut to the bank’s key overnight lending rate as a result of plunging oil prices. The overnight rate, which moved to 0.75 per cent, had been at one per cent since September 2010. If banks follow suit and lower their prime rates, the decrease will result in lower interest rates for variable rate mortgages, lines of credit and other loans.Canadians are waiting to see if their banks will follow suit. Major banks don’t always adjust their prime lending rates in lockstep with the Bank of Canada’s overnight rate. Currently, TD has announced that it does not intend to cut its prime rate at this point. Other major banks such as RBC, Scotiabank, the Bank of Montreal and CIBC have yet to state whether or not they will adjust their rates.This change comes on the heels of the Government of Canada delaying the 2015 budget. Federal Finance Minister Hon. Joe Oliver says the federal budget will be delivered no sooner than April.The moves likely indicate that the Bank of Canada and Government of Canada are concerned about the impacts of declining oil prices, declining government income from oil exports, and decreases to both investment and employment in the energy sector. Further, several large private-sector firms have announced major layoffs and economists have slashed growth projections for 2015.
Prime Minister Stephen Harper called the rate cut ‘appropriate’ and noted that there will not be any new stimulus provided to drive Canada through current economic uncertainty. He said Canada’s varied economy, and sectors like small business, manufacturing and innovation, will promote economic growth during this time.