Valley First

Rate cut could squeeze household budgets, says financial expert

January 15, 2016

Penticton, B.C.—With the Canadian dollar hitting lows not seen since 2003 and oil prices—a significant driver of the Canadian economy—continuing to tumble, some economists are now predicting the Bank of Canada will be forced to cut interest rates in a bid to keep the struggling Canadian economy growing.

Bank of America Merrill Lynch this week announced it is predicting the BoC to slash its benchmark lending rate to just 0.25 per cent at the Bank’s scheduled rate announcement on Jan. 20. This would drop rates back to historic lows seen following the 2008 financial crisis and be the third time the Bank has cut rates in the last 12 months.

“A rate cut would most likely push the loonie lower and that will hit household budgets,” says Stacey Agecoutay, an investment expert with Valley First, a division of First West Credit Union. “As an importing nation, a sagging dollar means Canadian consumers can expect an increase in the cost of food, since the majority of what we buy—especially produce—comes from the U.S.”

If a rate cut does eventuate, increases may also be seen across a wider range of import goods as the buying power of the Canadian dollar diminishes. Agecoutay says these increases could put a strain on households in the lower to middle income classes or those who rely on fixed or investment income.

“A larger percentage of income in these households goes towards food,” says Agecoutay. “A rate cut would also hurt retirees, as the return they earn on guaranteed investments would once again be reduced.”

Agecoutay recommends consumers speak with their financial advisor to understand the full impact these economic factors have on their finances and financial plans.

About Valley First

Valley First is a premier provider of banking, investment and insurance services for residents and businesses in the Okanagan, Similkameen and Thompson valleys. As a division of First West Credit Union, B.C.'s third-largest credit union with 54 branches and 38 insurance offices throughout the province, Valley First brings innovative products, an extensive branch network and local decision making to the banking experience. For more information on Valley First, visit

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