That’s what the Bank of Canada said today as they hacked off 3/4% from Canada’s key interest rate.
Today’s was the biggest move since October 2001. The National Post called it “radical.” Prior to this announcement, 20 out of 23 economist surveyed by Bloomberg had predicted “just” a 1/2% cut. Only two foresaw a 3/4% move.
Canada’s overnight rate hasn’t been this low since 1958. (The record low is 1.12%) TD, for one, expects further rate cuts in 2009.
Speaking of TD, they were the first to change their prime rate today. Much to the disappointment of many variable-rate mortgage holders, TD lowered their prime rate by only 1/2%. This time they chose not to explain why they didn’t match the BoC’s 3/4% reduction.
CIBC quickly followed TD’s lead and also lowered its prime rate by just 1/2%. Given that variable-rate margins are still tight, the rest of the banks will likely cut by only 1/2% as well.
Canada’s 5-year bond yield is currently down to 2.17%.
The 30-day bankers’ acceptance yield is now at 1.97%, down over 1.00% since the Bank of Canada’s last surprise rate cut on -October 8.
The BoC’s next interest rate meeting is January 20.
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