Bank of Canada opens door to interest rate cuts, downgrades growth

Interest rate, as an indicator of the economy, it represents the cost of borrowing money that is the price of money. Bank of Canada uses interest rate as a tool in conducting monetary policy to foster economic growth and inflation.

Dropping a warning of a higher interest rate will create an incentive of borrowing immediately. As a result, people have the tendency to stop spending since they have a huge amount of debt to pay; and when consumption is low, it slows down the economic growth as well as inflation. Keeping a 1% interest rate for three years since the crisis in 2007 indicates that Canadian’s economy is still in recovery. It also proves the statement in the article that “[t]he Canadian economy has struggled, struggled with a growth rate that is below two per cent”.

Business Forecast: Bank of Canada interest rate announcement

 

Link:

http://www.ctvnews.ca/business/bank-of-canada-opens-door-to-interest-rate-cuts-downgrades-growth-1.1509477#ixzz2iZeXmDYI

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