The Bank of Canada, interest rates

SADIA HANIFAZ is a business correspondent at BBC News & World Report.

The Bank of Canada, the Central Bank of Canada, cut its interest rate on Wednesday to 1%, down from 1.5%. The Bank of Canada governor, Stephen Poloz, says the time has come to get rates down. He says a four year economic expansion is hitting a stall. He says it is no longer possible to raise interest rates, they are simply too low. But low rates have led to ever-increasing housing prices, which could prove very dangerous if prices suddenly start falling. Mr Poloz says it would be the ‘largest housing correction since the early 1990s.’ He says ‘The threat of a large correction in the housing market poses a serious threat to the economic outlook and the financial system.’ Some analysts say Mr Poloz is taking extreme action. Others say it’s a sensible first step that might help the recovery become sustainable.

Mr Poloz says policy makers in Britain might be able to learn from his decisions, but the UK recovery is going to have to recover on its own.

Source: BBC

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