The Bank of Canada's Interest Rate Cut (What It Means for You)

What I really want to bring to your attention is have you thought about the fact that. Do you have any control over the situations? The bank of Canada has cut its benchmark interest rate from 5% to 4.75%, which maybe could be the start of another series of cuts, or perhaps it's probably something on the horizon that you may not even be aware about. With this interest rate cut, even though it's only 25 billion basis points, there is going to have some impact on those of you who have variable mortgages entering into car loans or even if you have outstanding lines of credits. Now, just to give a little bit of context, this interest rate cut is actually just the beginning of the first one since four years ago when they had interest rate cuts. Now over those four years, two years of those four years resulted in interest rates going up 10 times increase by the bank of Canada. Even though the cut may seem minor, it kind of starts like something new has happened after a very long four years and that is going to make borrowing cheaper, potentially stimulate the economy. At least that's what Tiff Macklem says, the governor of the bank of Canada. To give additional context, Canada is actually the first of the G7 countries who started to lower their interest rates. What about all the other countries? Could they also decrease their interest rates? Well, maybe Canada actually is a reflection of the other major economies like the United States, which is run by the Federal Reserve, and the European Union, which is run by the European Central Bank. Those are both central banks that are larger than Canada. And maybe they are the ones who, because of just the positioning of timing of when they are going to make their announcements, they're going to potentially decrease their rates. And that's why Canada is also following with that. One of the main things that is driving this message on the decrease of interest rates is mainly because they're looking to restore price stability and maintain and get closer to this coveted 2% inflation target. Five years ago, prices of groceries were not anywhere near 2% cheaper or 2% from where it was before. I really want to encourage you to evaluate whether some of the messaging that you're getting makes sense. I mean, I know immediately you are getting some interest payment relief because on the variable interest rates, however, what I really want to bring to your attention is have you thought about the fact that do you have any control over the situations that bank of Canada's Governor Tiff Macklem makes, whether he increases interest rates or decreases interest rates? This is a very important thing. You're not involved in making decisions as it relates to monetary policy. You're not involved in putting any votes towards making any decisions towards monetary policy. You don't have Tiff Macklem's phone number on speed dial to even encourage or tell him the impacts that you have as it relates to the interest rates that he's saying. However, all of what is being shared is it's for the greater good and it's going to help you for reasons of bringing down this coveted 2% inflation target. Now with this interest rate going down, it is going to have potentially ripple effects because now if businesses don't need to spend money on interest volumes of interest dollars now, because maybe they're on lines of credits or operating lines of credits, they can at least spend those dollars towards potentially hiring new workers to fill the job vacancies, which they could potentially afford now or maybe pay for inventory or maybe pay for other things. However, it's really just important to recognize that this type of an announcement, it may have an impact on you and it may not have an impact on you. What is really important though is you're not in control of the situation. And one of the main things Nelson loves to teach us is taking control of the banking function as it relates to your needs. Because if your primary method of taking control of the banking function resides in influences that you have much more control over, something like this wouldn't impact you as much. Here's another way to look at it. The decrease in the interest rates down to 4.75% from the bank of Canada also has a parallel impact on the deposits you are depositing to the commercial bank. Now if it's going into checking accounts, I'm sure you can recognize the amount of interest you get on those checking account balances is pretty close to minimal or nothing. And you've been conditioned to recognize that that's just normal. You're told to move it to savings accounts and maybe right now there's a lot of promotions related to the savings going up for 5%, 6%, and, and that's really going to attract you to send more of your money and your deposits to those commercial banks. This is another important point that with the decrease in the interest rates that relate to the policy set by the bank of Canada, that's going to have a corresponding decrease as it relates to interest in specific savings accounts, interest in particular bonds, interest and in particular checking accounts as that goes down and the money that you send to the commercial banks are also likely going to go down. Just something for you to recognize. I just want to encourage you to watch to Visit our site watchibc.com to make sure that you can learn about an alternative where you can take control of the banking function in your life and bring you further and closer to your financial journey. Thanks for watching.