OTTAWA — With another interest-rate cut by the Bank of Canada widely expected this week, the only real question is: how far will it go?
Most analysts are leaning towards a modest quarter-point reduction from the central bank on Tuesday. But many also warn it’s a tough call and a deeper, half-point reduction could as easily be justified. Consumers and businesses are watching closely.
Mortgages, other household borrowing and business loans can be affected by movements in the central bank’s key rate. David Rosenberg, chief economist with Merrill Lynch Canada, said he expects a quarter-point reduction but won’t be shocked if central bankers cut more.
“I would have to say the odds are tilted towards a 25-basis-point rate cut, as opposed to 50 (basis points) and that’s the debate — not whether the bank goes, but by how much.”
One hundred basis points equals one percentage point. Canada’s largest trading partner, the United States, has seen its economy almost grind to a halt with no obvious signs of relief. That bolsters arguments the Bank of Canada should cut rates aggressively to encourage a quicker turnaround here.
