Bank of Canada Stuns with Rate Cut
The Bank of Canada sent shockwaves through the market today when it slashed its benchmark interest rate by a quarter of a point to 0.75% in response to plunging oil prices. It was the first rate cut since April 2009 and made Canada the first Group of Seven nation to take such action against the oil collapse in which the price for a barrel of crude has fallen below $50 from $100 last May.
The bank had been expected to raise rates later this year or in early 2016. And the surprise move stoked fears in some observers that Canadian consumers, who are already the most overleveraged of developed economies, could borrow aggressively. A Bank of Canada spokesperson said that while falling prices could benefit American consumers, they would be "unambiguously negative" for Canada as it impedes growth and inflation there.
In other news from up north, Bloomberg reported today that risky shadow lending has arisen in the wake of mortgage reforms to cool a red hot housing market.
