A forecast from CIBC World Markets predicts that the bank of Canada will make a further 0.25 per cent cut to interest rates in March despite the current weakness of the Canadian dollar. Chief economist Avery Shenfield says that growth will be lower than 2 per cent this year and sees the loonie falling to 77 cents US and not recovering too much above 80 cents US.
Avery notes that there is a need to shift economic growth from housing and debt to exports in spite of the weak oil prices and also that the US is likely to increase its interest rates in the summer, putting additional pressure on the Canadian dollar. There is also a possibility that the BoC will take even more action later in the year: “While that second cut is priced in, markets may then guess about a third” Avery says but with CIBC expecting a recovering oil price by the end of the year it is also forecasting a “reversal of the Bank of Canada’s rate cuts in 2016.”
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