” 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.”

    “Given the cumulative reduction in the target for the overnight rate of 150  basis points since December, the timing of any further monetary stimulus will depend  on the evolution of the global economy and domestic demand, and their impact on  inflation in Canada,” the central bank said.
     The bank pushed back the time frame for inflation to move back up to its 2  percent target to 2010 from end-2009 and for the economy to move back into balance  to mid-2010 from early 2010. It said the economy was operating above capacity now  but would move into excess supply in the second quarter of 2008.
     Tighter credit conditions and weakening confidence will likely weaken business  investment and consumer spending, the bank said. However, it sees domestic demand  staying strong due to high commodity prices, a vibrant labor market and the effect  of cumulative interest rate cuts.

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.