Canadian Manufacturing

BoC will likely cut overnight rate, say BMO economists

The key overnight rate sits at 0.5 per cent, and Poloz is scheduled to make his interest rate announcement Jan. 21



OTTAWA—Economists at the Bank of Montreal (BMO) are joining those predicting the Bank of Canada (BoC) will cut its key interest rate next week.

The bank cited low oil prices, a weak business outlook survey and recent comments by BoC governor Stephen Poloz as reasons for its new forecast.

Poloz recently said that while the steep slide in oil prices can be mitigated to a degree, there was no simple policy fix to the ailing economy.

CIBC also says that the odds have tilted in favour of a rate cut by the central bank, either next week or in April.

The key overnight rate sits at 0.5 per cent, and Poloz is scheduled to make his interest rate announcement Jan. 21.

The BoC cut its key interest rate twice last year in an effort to cushion the impact of falling oil prices on the economy.

By cutting its target for the overnight rate, the central bank is trying to push down the interest rates charged by Canada’s big banks, making it cheaper for companies to borrow money to grow their businesses.

A cut also likely means lower interest rates for variable rate mortgages, lines of credit and other loans based on the prime rate, likely to boost consumer spending.

But the banks have not passed on the full savings of the Bank of Canada’s most recent rate cuts to consumers.

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