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Bank of Canada’s rate cut will help "at the margins," economist says

0 49 Infrastructure

by Denise Holtby

The latest Bank of Canada cut to the target overnight rate will have some impact on public and private sector investment plans “at the margins,” said CanaData chief economist Alex Carrick.

Editor, Digital Media

The latest Bank of Canada cut to the target overnight rate will have some impact on public and private sector investment plans “at the margins,” said CanaData chief economist Alex Carrick.

“As mortgage rates and business borrowing costs are cut to correspond with the bank rate, investment intentions will improve to a limited degree,” said Carrick.

However, Carrick pointed out that, at the moment, interest rates are not inhibiting the economy to the same extent as job losses, profit declines, ongoing U.S. and European banking problems, the world-wide recession and distress-level commodity prices.

All of the above factors will continue to affect public and private-sector investment plans, he said.

However, the construction economist points out one positive effect of the lower overnight rate — the BoC’s cut will keep the bias for the Canadian dollar versus the U.S. dollar down and a low-valued loonie means higher import prices.

“This is important,” Carrick said.

“Inflation in Canada must remain above that critical zero per cent level and deflation must be avoided.”

For more analysis, read Alex Carrick's latest blog post, entitled The Bank of Canada's overnight rate cut and Construction Investment Plans.

– RCD Digital Media

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