Huge Interest Rate Drop – Bank of Canada

Shopping in LAThe Bank of Canada’s overnight rate is now at 1.50% after a 75 basis point drop today. A global recession and a strongly integrated economy with the U.S. is contributing to Canada’s recession. My parents, especially my dad has been speaking about how the economy is doing poorly because he is directly affected by the economic decline being in the manufacturing, auto industry. With a prorogued parliament, a stimulus plan is still uncertain. In addition, within the co-op system, many employers have been canceling co-op jobs because of budget issues, leaving a large number of co-op students unemployed. As noted in the BoC’s press release, “The recent declines in terms of trade, real income growth, and confidence are prompting more cautious behaviour by households and businesses.”

Spending is definitely encouraged, but only if you have the means to do so. My principle is: minimize or eliminate debt at all times. How are my parents going to stimulate the economy? They want to buy a house. How am I going to stimulate the economy? Let’s do some Christmas shopping! Don’t get too excited though. I still think that investing your money is a better idea in the long run. Get your $5000 ready because you’ll want to open a Tax Free Savings Account (TFSA) in January 2009. I would recommend investing in some index funds since GICs are no good with low interest rates.

Source: Bank of Canada – Bank of Canada lowers overnight rate target by 3/4 percentage point to 1 1/2 per cent

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