Several factors sparked the Bank of Canada’s latest interest drop.
While some are worried about the state of the national economy, other think there are some hidden benefits.
Banks could potentially lower prime lending rates, while exports like lumber still get a good return.
“When lumber gets sold, it’s quoted on the marketplace in US dollars,” says KPMG partner Stan Mitchell, “if I’m selling something that’s paid in US dollars, my Canadian dollar isn’t worth as much… When I convert my US dollars back to Canadian, there is more money in my pocket.
The government expects the Canadian economy to grow by a slim 1.1 percent this year.
But, like most statistics, the state of the loonie and interest rates must be looked at on a larger scale.
“It’s something you have to look at on a trend basis,” says Mitchell, “Like anything else, things go up and down and it may be the result of a specific circumstance.”
“The economy has been operating below full capacity for some time, which is why we estimate the trend in inflation is running at 1.5-1.7 percent” Governor Stephen Poloz explained the day interest rates dropped.
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