NEWS

Poloz slashes rates & Tsipras concedes more cuts: BUSINESS WEEK WRAP

07/17/2015 05:30 EDT | Updated 07/17/2016 05:59 EDT
Just as it did when it cut interest rates in January, the Bank of Canada surprised many this week with a rate cut. Although the move to 0.5 per cent from the central bank was expected by many watchers, the impact of Canada moving to ease its monetary policy is still large.

Canada moving to cut at a time when America seems to be ramping up for a rate hike makes the move especially big, since Canada tends to move in lockstep with the U.S. since our two economies are so correlated.

While it's great news for anyone with a mortgage (or who's looking to get one) the real goal of the policy is to make it easier for businesses to get money to invest. Cheap rates typically move the loonie lower, which is great for manufacturers who export their goods to the U.S. market.

Increasing exports now is especially important since the price of oil cratered, but some say the bank's move to help manufacturers is too little and too late. "As things stand right now, I don't really expect to see any rebound, any meaningful sort of sharp rebound in the second half of the year in terms of non-energy exports," David Madani, an econoimst with Capital Economics in Toronto, told us this week.

Impact unclear

So, what does the rate cut mean for you? It depends who you ask. If you get a new mortgage, or have a variable rate on an existing one you are likely to see a bit of a break. 

But not necessarily for the full amount you might be expecting. The central bank cut their rate by 25 basis points, but the big banks have so far only passed on 10 or 15 points of those on to their customers. 

And fixed-rate mortgages aren't likely to come down at all, since they are set based on long-term lending rates on the bond market, not the central bank's "target for the overnight rate" that banks use as a yardstick for their floating rate loans. 

Others worry that lower rates will just encourage Canadians to go out and borrow more. The CBC's Sophia Harris found that out this week in her story on Canadians more than eager to take advantage of lower rates to borrow more.

And you might think the real estate industry would welcome the news, but that's not entirely true either. Phil Soper, the president of Royal LePage told us this week that people might take the bank's bleak reading on the economy as an excuse to not invest in housing, even if it is temporarily more affordable.

"It's counterintuitive, but a rate cut may actually wake some people up to the fact that, you know, things aren't all roses. This economy has to get back on its feet again," he told us this week.

Greece crisis continues

Borrowing money may be getting cheaper in Canada, but that certainly isn't the case in Greece, where the economic prospects of the debt-laden country were as murky as ever this week.

The government managed to pass a major austerity bill thatwas required by the country's creditors, but it came at the cost of a near mutiny in the governing Syriza party. 

Greek Prime Minister shuffled his cabinet to remove ministers who didn't back him on the key vote, but that wasn't the end. It was a fight to get it through parliament, and it spilled out into a fight on the streets.

Greek protestors clashed with police outside the parliament building. Many Greeks say they can't handle any more austerity and this package of cost-cutting measures is expected to be particularly painful includes sweeping tax hikes and spending cuts.

Stay with CBC Business for more, as the Greek story isn't one that's going away any time soon.

Other stuff

Those stories were just a sampling of the great stuff we had on offer of late. Here's a day-by-day rundown of our most popular stuff of the past week.

Monday

Tuesday

Wednesday

Thursday

Friday

MORE:cbcNews