The Bank of Canada shocked markets today by cutting its key overnight lending rate by a quarter of a percentage point, citing the economic threat posed by plunging oil prices.
“The drop in oil prices is unambiguously negative for the Canadian economy,” Bank of Canada governor Stephen Poloz said in a morning news conference. “Canada’s income from oil exports will be reduced, and investment and employment in the energy sector are already being cut.”
The overnight rate, which moves down to 0.75 per cent, had been at one per cent since September 2010. The cut will result in lower interest rates for variable rate mortgages, lines of credit and other loans that float with prime rates.
Virtually no economists had been predicting a rate cut.
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