This week, the Bank of Canada is expected to announce an important interest rate decision. Most economic analysts and market observers predict that the bank will cut interest rates again.

Why lower interest rates?

Declining inflation: The latest inflation report shows that Canadian annual inflation fell to 2.7% in June. This figure is lower than the 2% target of the central bank.
Declining economic growth: Some signs indicate that Canada's economic growth is slowing down. Lower interest rates can help stimulate consumer demand and business growth.
Increase in unemployment: The unemployment rate has increased in the last month. Lowering interest rates can help maintain employment and prevent further unemployment.
How much will the interest rate decrease be?

Most experts predict that the central bank will cut the interest rate by 25 basis points. This reduction will bring the interest rate from the current 4.75% to 4.5%.

The effect of interest rate reduction on you:

Lower loan payments: If you have a mortgage or other loan with a floating interest rate, as the interest rate decreases, your monthly payments will also decrease.
Reduction of savings yield: As the interest rate decreases, the interest on bank deposits also decreases.
Final word:

Lower interest rates can be good news for households and businesses that are in debt. But on the other hand, it can negatively affect the income of those who have savings.

Attention:

This is a forecast based on economic analysis and the final decision rests with the Bank of Canada.
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