Bank of Canada cuts interest rates

Governor Mark Carney have announced today that the Bank of Canada will be cutting the interest rates for overnight loans between commercial banks to 2.25 percent. However, the cut is smaller than economists had predicted, meaning that it is quite likely that the bank may need to act again.

Since the coordinated move of widespread cuts, the Bank of Canada is the first central bank to go ahead with a secondary cut, even though the economy does seem to be holding out well against the recession.

In a statement that was released today, the Bank did actually hint that rates will be cut further and that is most likely to be timed in the next announcement which is due at the end of the year.

The half rate cut is being described by many analysts as a moderate measure although it is useful as it does allow the big banks of Canada to pass on the reduced rates to its customers, even though private banks had initially refused to pass on the savings to customers.

Following the CAD$25 billion pound bailout announcement, Canadian banks did communicate the saving to customers except TD Canada Trust and CIBC who have stood firm.

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