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Bank of Canada Slashes Rates 1/2%

BofC Mark Carney‘s first rate announcement was a big one. 

He and the Bank of Canada have just cut Canada’s key interest rate 1/2% to 3.5%.  It was the first 1/2-point change since 2001.

Barring the unexpected, mortgage shoppers should now expect variable-rates (and prime rate) to drop 1/2% this week.  That equals a $58 monthly savings on a typical $200,000 mortgage amortized over 25 years.

Several economists predicted this cut but it will still be a pleasant surprise to many.  The Bank says our domestic economy is holding up.  Their real concern seems to be a faltering U.S. economy and its effect on our exports.

In a prepared statement the BoC said:  “…the U.S. economy is likely to experience a deeper and more prolonged slowdown than had been projected in January…These developments suggest that important downside risks to Canada’s economic outlook…are materializing and, in some respects, intensifying.”

The Bank ended by noting, “Further monetary stimulus is likely to be required in the near term.”  That means we could get another cut at the next meeting, scheduled for April 22, 2008.