SURPRISE! ...Bank of Canada drops key rate to .75%... but will the banks follow?

SURPRISE! ...Bank of Canada drops key rate to .75%... but will the banks follow?

Jan 21, 2015

Many of us have steered away from the variable rate mortgage since it has not moved in over 4 years, but after todays shocking surprise that the key interest rate is decreasing .25%... the next question is, how will the banks respond?

Here is the story more in depth: via CTV News

The looming economic threat of sliding oil prices is forcing the Bank of Canada to unexpectedly cut its trend-setting rate to three quarters of a percentage point from one per cent.

The central bank's announcement follows the stunning nose dive in crude prices since the summer.

The bank says the price collapse poses considerable uncertainty for economic growth in the oil-producing nation.

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It is the first time the bank has moved its overnight rate in either direction in nearly four and a half years.

Most economists had been predicting the bank to stand pat on the interest rate today and hike it late this year or in early 2016.

But the bank says falling oil prices threaten to overshadow signs of economic life spotted outside Canada's weakening energy sector -- such as rising foreign demand, a boost in exports and job growth.

The Bank of Canada's concerns over the oil slump come as some Canadian industries reel from the sharp plunge in crude prices, which are down more than 55 per cent since last June.

The decline in oil prices is also expected to shave billions of dollars from the bottom lines of federal and provincial governments.

Last week, the federal government took the rare step of delaying the budget until at least April, so it could assess the effect of tumbling crude.