The biggest effect of the Bank of Canada lowering its key interest rate might be felt by Canadians traveling south of the border.
News Talk Radio business commentator Paul Martin says the Canadian dollar has already reacted to Wednesday’s cut, falling more than a cent.
“This (cut) is really designed to see if it will spark exports,” Martin explained. “And the interest rates are less important to that than the Canadian dollar.”
Canadian products will be cheaper as the dollar falls. Martin explained that those working in an export industry such as agriculture, oil, potash, forestry, and tourism will likely see an increase in business as their product will be more attractive to international buyers.
Borrowers will see some impact from the cut. Martin explained that the major banks had already reacted to the cut lowering rates slightly.
Borrowers on a floating rate will see their interest rates go down as well.
As far as a recession goes, Martin says Canada could already be coming out of one. He explained that a recession isn’t usually declared until more than a month after two consecutive quarters of negative growth.
“The irony is we take all this action because of the recession but we might well be over the recession by the time we start acting on it.”
Martin says it’s difficult to know what will happen next. He says there’s not much room for the Bank of Canada to lower its interest rate any further.