The Bank of Canada slashed its interest rate by 0.75 per cent today. The new lending rate, 1.50 percent, is the lowest in 50 years. The move came with dire warning that the Canadian economy “is now entering a recession as a result of the weakness in global economic activity.” Interestingly, for the second time in two months, Canada’s big banks, like TD and CIBC, have so far refused to fall in line, cutting their rates only half a percentage point. Canada’s bank have been reluctant to follow-through with the rate cuts, given the high costs of financing in these troubled times. The last time this happened, in October, the commercial banks received a gentle scolding from the prime minister, who said he was “disappointed” the commercial banks weren’t passing on the rate cut. Can we expect stronger language this time around from a PM who’s in a much more delicate position politically?
Update: Bank of Montreal, Royal Bank and National Bank are also refusing to play along, and opting for a 0.50 per cent cut.