Today (Wednesday, March 4th) the Bank of Canada (BoC) decided to cut its key overnight lending rate by 0.5% on this scheduled announcement date. Although this move looks to be in line with the unscheduled rate cut made by the U.S. Federal Reserve yesterday due to the impact of the coronavirus on the U.S. economy, this rate cut is long overdue for the Canadian economy. Prior to this earlier this year and late last year the BoC should have cut its rate by at least a quarter-point each time. The Canadian economy has been dragging for well over a year. Although most attribute this to world trade difficulties and oil prices, the reality is that poor federal government policy and indecision is the real culprit to poor economic growth in Canada. This, outlined by regressive tax legislation and disincentives for investors are the real issues keeping the Canadian economy from performing at its optimal level.
The Bank rate is now 1.25% down from 1.75% and major FI should be following suit to drop their prime rate of interest to 2.45%.