0.75% cut by Bank of Canada

[BankAdmin]

The Bank of Canada cut its key interest rate on Tuesday by 0.75% to the lowest level since 1958! Canada's benchmark overnight rate is now only 1.5%. This was another confirmation that Canada is entering a serious recession and the bank is desperately trying to restore normal credit flow and to help the sagging Canadian economy.

The big Canadian Banks didn’t match the full cut, and dropped their prime rates by 0.5%, which will likely make many over-indebted Canadians addicted to cheap or free money angry.

The Canadian Central Bank stated the following: "The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated," The Bank of Canada left the door open for more rate cuts in the future.

[Canadian]

The very reason for this crisis - artificially low interest rates and huge leverage are pushed to us by the Bank of Canada as a solution for the problem. Very smart and original, and I'm sure it will work, NOT!

[Jason]

So now the interest rate stands at 1.5%, and the Bank of Canada doesn't have much more room for cuts (a maximum 1% from here I think). What are they going to do when this doesn't work either? Are we in for a painful decade-long recession like Japan had in the 90's?

[bullish]

The cut was the right thing to do and it will help the economy get back on track. It also helps homeowners with their mortgages.

[Canadian]

Originally Posted by bullish

The cut was the right thing to do and it will help the economy get back on track. It also helps homeowners with their mortgages.

I don't think that simply cutting interest rates can help our economy. Canadians are carrying huge debt loads and they simply cannot borrow more. Those who can are smart enough and don't want to. Saving money is the order of the day and it will stay this way for quite a while.

Your assumption that lower interest rates will help homeowners it's also not entirely correct because of two facts you are missing. First the Canadian banks refuse to pass all the entire cut to their customers, second the assumption that lowering interest rates lowers all existing loans is plainly wrong.

[investor]

Originally Posted by BankAdmin

The Canadian Central Bank stated the following: "The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated," The Bank of Canada left the door open for more rate cuts in the future.

Do you think we can get 0% interest or even negative interest like it is in Japan?

[Steven]

Well US already has official interest floating between 0% and 0.25%, so I don't see why we can't have it here. I'm not looking forward to it though, because if this happens, then we will be in for a big trouble.

[Canadian]

I really hope that the Bank of Canada doesn't lower the interest rates to 0%. This will be a desperate measure and will speak volumes about the shape of the Canadian economy.