Will the Bank of Canada and U.S. Fed cut interest rates this week?

Monetary policy announcements from central banks in Canada and the United States are scheduled for July 30, and most economists are expecting no changes to borrowing costs.

This week is sure to be a nail-biter for many Canadians and Americans watching whether central banks in both countries will hold their current interest rates in place.

On July 30, both the Bank of Canada and the United States Federal Reserve will announce the status of the benchmark or overnight interest rate. This is the floor that most commercial banks and other lenders use to build their own interest rates, or prime rates for customers and clients.

Interest rates set by the central banks are a crucial factor in shaping how much consumers pay for things like auto loans and mortgage rates, and the pending decision by both banks on Wednesday comes amid a broader cost-of-living crunch for consumers.

But experts believe the chances of a rate cut happening are slim — especially given the current trade war.

Based on the current and future state of the economy and labour market, most experts believe the Bank of Canada will make no changes to interest rates on Wednesday, although nothing is guaranteed at this point.

With mortgages, for example, a bank like TD or CIBC bases its prime mortgage rate off of the overnight criteria set by the Bank of Canada, which is currently 2.75 per cent, and as of publication, virtually all of the big Canadian commercial banks have a prime rate of 4.95 per cent.

Those who are looking to apply for a mortgage very soon, or currently have a variable rate mortgage, are likely paying very close attention for an update. If the Bank of Canada changes its lending policy, then their expected costs will likely change as well.

This means that if a client of a commercial bank applies for a mortgage, their interest rate on that loan could be as low as 4.95 per cent. But, if the Bank of Canada changes its overnight benchmark, then commercial banks will usually change theirs for clients as well.