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Banks drop overnight rate to 0.25 percent

4108 Views 4 Replies 5 Participants Last post by  Robillard

The article says that the major banks will cut their prime rate to 2.25%
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Given that inflation was 1.2% in the year to March 2009, and there seems to be plenty of slack in the economy (rising unemployment and factory closures) it's not surprising that the Bank of Canada feels it can drive short term interest rates down to practically zero. If inflation expectations get any lower, I wouldn't be surprised if the Bank of Canada resorts to the "quantitative easing" strategies employed by other central banks, since it is its stated policy to keep inflation between 1 and 3%.

Here's a question: Do you think it is right for the Bank of Canada to employ inflation targetting? Is the 1-3% range with a 2% target reasonable?
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