Canadian banks - will they lower interest rates?

[trent]

With the expected interest rate cut tomorrow (/01/20/2009), do you think banks will pass the lower rate to consumers and Canadian businesses?

[Zephyr]

Originally Posted by trent

With the expected interest rate cut tomorrow (/01/20/2009), do you think banks will pass the lower rate to consumers and Canadian businesses?

Probably not. They can't afford to do it. I think the interest rates will have to go up in the near future

[Canadian]

They will pass them only partially. If the cut is 0.5% then they might offer 0.25% for example.

[Steven]

Originally Posted by Canadian

They will pass them only partially. If the cut is 0.5% then they might offer 0.25% for example.

I think that all big banks lowered their prime rates, by the same amount the Bank of Canada did. I'm also surprised, but I guess the banks got a lot of pressure from Flaherty and the conservative government to do so.

[Canadian]

Originally Posted by Steven

I think that all big banks lowered their prime rates, by the same amount the Bank of Canada did. I'm also surprised, but I guess the banks got a lot of pressure from Flaherty and the conservative government to do so.

They can lower rates to 0%, but if consumers are not willing to borrow more, then the banks and the establishment have a big problem.

[trent]

Originally Posted by Canadian

They can lower rates to 0%, but if consumers are not willing to borrow more, then the banks and the establishment have a big problem.

The banks have a problem either way. If the consumers stop borrowing, then the economy is toast, because is based largely on debt versus savings. If the consumers keep on borrowing for a while longer, then the mountain of debt grows even higher and the pain will be even greater, albeit delayed.

[Canadian]

Unfortunately you seem to be right.