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What will the Bank of Canada do tomorrow with respect to interest rates…It likely doesn’t matter much what they do tomorrow but rather what is the outlook over the next couple of rate setting dates?  For the record the conventional wisdom is that they will drop .50% and the market is likely already priced that in.  As such it would be nice I think if they did .75% to be a nice welcome surprise for the market.  Regardless I think we could expect that the rates will be at least another 1% lower over the next two rate setting dates to come in at 1.25% (which provided the retail banks match the cuts would put Prime at 2.25%)  There is an outside chance we could see the bank rate go to 1% and consequently Prime to go to 2%.Could you imagine what effect that will have on consumers who have Prime minus .90% mortgages that were offered as early as this year?  1.10% mortgage rate…it is things like this that make us all wonder what is the new normal? 

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