Market Commentary provided by First National Financial LP

To cut, or not to cut? That is the big question for the Bank of Canada this week.

More and more market watchers are expecting another drop when the central bank sets its policy rate this week. Right now a little more than half believe we will see the overnight rate trimmed by a quarter point to 0.25%.
It sounds like good news for those with variable-rate or hybrid mortgages, but many observers, including those who expect to see a cut, are calling it a bad idea.

Key concerns include:

  • Adding more heat to the housing market, especially in Vancouver and Toronto.
  • Adding more imbalance to the, already out of whack, household debt-to-income ratio.

Further undermining the value of the loonie. That would immediately reduce consumer purchasing power while offering minimal benefits to the export sector which is battling slow growth in the global economy.

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