Banks fail to pass on full interest rate cut to tackle recession
The move by the Bank of Canada to cut its key interest rate will help consumers out a little, but experts say with rates already near record lows, it won’t mean much for individual borrowers.
Canada’s big banks trimmed their prime rates by 0.15 percentage points to 2.7 per cent in the wake of the central bank’s move Wednesday that cut its overnight rate target by a quarter percentage point.
Sherry Cooper, chief economist at Dominion Lending Centres, questioned the effectiveness of the rate cut to boost the economy with the big banks only passing on a portion of the reduction by the Bank of Canada.
“At the margin, this might boost housing and consumer credit a bit, but these are not the sectors most in need of stimulus,” Cooper said.
Moves in the prime rate directly affect the amount charged on loans such as variable rate mortgages and floating rate lines of credit.