Via Reuters:
” OTTAWA, April 22 (Reuters) – The Bank of Canada cut its benchmark interest rate on Tuesday by a half-percentage point to 3 percent, as expected, and signaled that further easing was required but suggested it might pause before cutting again.
In a statement which projected a steeper U.S. economic downturn that would dampen Canadian growth, the bank said “further monetary stimulus will likely be required,” but dropped a previous reference to the need for more cuts in the “near term.”
Every time the Bank of Canada (BOC) or US Federal Reserve is due to make a rate decision, the staff on the trading desk where I work place bets on how large the move will be and in which direction. Unfortunately, I run about 50/50 as a success rate.
It is very hard to get into the heads of those involved in these decisions. Sometimes the difficulty is determining whether or not they will act, others it’s how high/low they will go. Tomorrow, the debate will be the latter, not the former.
Nearly everyone on Bay Street is calling for a cut from the BOC’s key interest rate tomorrow. Nearly everyone is calling for that cut to be 50 basis points, bringing the overnight rate to 3.00%. The only problem is nobody seems to agree on if the Big 5 private banks will follow by cutting their Prime lending rates by the same amount.
The entire purpose of the BOC rate cut would be to stimulate the economy by making money cheaper. Loans would have lower costs (interest) and would encourage spending. If the banks refuse to lower their rates, it would signal that they believe that their interests are above those of the economy, that their profits are more important than the financial and economic well being of their customers. A greedy, disgraceful and obnoxious move.
