... and so, yesterday, July 15, 2015, the Central Bank of Canada cuts Interest Rates for the second time this year. Right after, the Canadian dollar loses value, which is a natural and expected consequence.
Exports seem to be the main factor behind such decision. Canada's merchandise trade deficit widened in May to $3.34 Billion from $2.99 Billion in April. Exports fell for the fifth month, second largest deficit on record after $3.57 Billion shortfall in March, according to Statistics Canada.
Canada's been struggling with its exports for sometime now because its products, goods and services are sold by other Countries at lower prices, or don't have much demand because other Countries are either already making the same or are economically struggling too.
Canada already lost market share in the US to countries such as China, Mexico and South Korea due to a high Dollar.
Oil prices dropped recently forcing the industry, specially in Alberta, to cut jobs and cancel investments.
So, by cutting interest rates (Canadian dollar falls against other currencies), the Central Bank is trying to make Canadian exports more attractive, competitive and increase sales, keep manufacturing jobs alive and reduce the gap between Exports and Imports.
It might benefit Tourism as well, since it becomes cheaper for tourists to come visit and shop in Canada.
On other hand, with the interest rates even lower, many already speculate that Real Estate market will be even hotter. But I'm almost certain, the lenders will increase the percentage of down payment.
