The Bank of Canada's interest rate cut is like a pie eating contest where the prize is more pie

Tonight's first order of business, a shocking move by Canada's central bank to lower interest rates. The betting until recently has been when rates will go up in this country — affecting mortgages and lines of credit for indebted households — so for some, lower rates will be very welcome news.

But since it signals grave concern on the part of the central bank about the state of Canada's economy, it's hard to be too gleeful. And since economists are already worried about household debt in Canada, its hard to see lower rates — which will encourage more debt — as anything but incentive for bad behaviour. Maybe it's just a sign that the Bank felt it had few options, but it's a bit like a pie eating contest where the prize is more pie.

— Amanda Lang

The Bank of Canada's decision today to cut interest rates was expected by virtually no one, which suggests we might have only just begun to feel the wrath of the oil price plunge. The bank shaved the rate to 0.75 per cent from 1 per cent, where it's been since September 2010. The rate hasn't been cut in nearly 6 years.

Today's move affects anyone with a variable mortgage, line of credit, or car loan, as the bank rate dictates those rates. So — good news for borrowers, but the move casts a dark cloud over the economy.

The bank said the shock from low oil prices has forced a downgrade to its growth projections. It now expects the economy to edge up 2.1 per cent in 2015, versus an earlier prediction of 2.4 per cent.That's because the oil slump will likely impact everything from business investment and employment to income and wealth. The bank now expects inflation to miss its 2 per cent target this year.

Bank of Canada Governor Stephen Poloz describes today's cut as economic "insurance," which had reporters asking, will he cut again? 

"We want to make sure that if there is more downside risk that we have appropriately positioned for it," said Bank of Canada Governor Stephen Poloz.

"But we must remember that the world changes fast, and if it changes again we have the ability to take out more insurance or, on reverse, to reduce how much insurance we've taken out. But at this time we simply don't have that kind of pinpoint accuracy that would allow a fulsome answer to that question." 

In the wake of the Bank's announcement, the Canadian dollar tanked, falling nearly two per cent today to its lowest level since spring 2009.