Will The Bank of Canada Drop Their Prime Lending Rate?

Last week it was talk of fixed rates going up soon; now there's talk of variable rates going down!
Last week we talked about how fixed or long term rates may start going up in the fall. This week there's talk of the Bank of Canada dropping their prime lending rate at next week's meeting. This would directly affect variable rate mortgages, not fixed ones. 
See recent market commentary from lender, First National, for whose forecasting this drop and why:

Market Commentary

"It did not take long but the "contrary" appears to be gaining credence.


Late last month about 70% of the economists surveyed by Bloomberg were betting the Bank of Canada would stand pat on interest rates for the rest of the year. One notable exception was long-time bear David Madani who said there would likely be two cuts and the overnight rate would move into 2016 at 0.25%.


Over the past 7 days several prominent economists with Canada's big financial institutions have come to embrace, at least in part, some of Madani's thinking. The key element that now has the big names looking to a 25 bps point cut – likely this month – is word that the Canadian economy shrank, again, in April.


The fourth consecutive month of contraction has the country flirting with a technical recession.


Low oil prices continue to get the blame but the Greek rejection of the conditions for further bailout money from Europe is a wildcard play that no one knows how to call. It remains to be seen what it will mean for bond yields, the euro and the dollar."



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