The U.S. Federal Reserve’s 50-basis-point interest rate cut on Wednesday is having ripple effects north of the border, with experts pointing to implications for both the Bank of Canada and Canadian mortgage holders.
The Fed delivered an oversized step for its first interest rate cut in four years, a move that surprised many economists who had expected a standard quarter-point cut.
To the north, the Bank of Canada is well-entrenched in its own easing cycle, having cut its policy rate by 25 basis points three times since June.
But Nathan Janzen, assistant chief economist at RBC, says the Fed’s moves will be felt in the Canadian bond market as well, an important proxy for mortgage rates in Canada.
Bond yields take their cues from central bank policy rate expectations in both the U.S. and Canada. These also act as benchmarks for key lending rates from Canadian banks, with the five-year government of Canada bond yield …