The Bank of Canada announced this morning that it is cutting interest rates by 0.50%. This take the target for the overnight rate to just 0.50% This takes the total easing to 4.00% since December 2007.
The bank said in it’s release that the global economic outlook has worsened since January with slower growth than expected in the major economies and the US recession with the weak car and housing growth is a big challenge for Canada. Q4 2008 also showed a sharp decline in Canadian economic activity.
They believe that the aggressive efforts of many countries will only begin to be felt in the 2nd half of 2009 and will build up through 2010, and Canada should be well placed to recover more rapidly than other industralized countries due to the underlying strength of the financial system and economy.
Interestingly they said that since rates are so low they need to look at other measures to stimulate the economy such as, “to provide additional monetary stimulus, if required, through credit and quantitative easing.” if its needed and will outline this in the next rate announcement on April 21st. This has meant effectively printing money in the US & UK so we’ll see how the Bank of Canada interprets quantitative easing.
The great news for mortgage shoppers is that some of the big banks have already announced they are decreasing their Prime rates by 0.5%. RBC, CIBC and BMO have already lowered t’s prime lending ate by 0.50% to 2.50% from 3.00%, effective March 4, 2009. Hopefully this will lead to lower variable mortgage rates as well.