Following the line of reasoning already applied by commercial banks in the UK and U.S., Canadian commercial banks now might be colluding to rebel against the Bank of Canada’s planned interest-rate cut and leave their prime rates as is this time. No ifs ands or buts about it, if implemented, such a move would effectively sabotage Canada’s central bank’s efforts to moderate the economy with the monetary policy.
On January 22, the Bank of Canada is expected to shave off another 25 basis points from its key lending rate. Usually, easier access to the credit supply would have been a welcome move by the banks. However, the global credit crisis has racked up quite a bill for commercial banks worldwide, which is why now many of them are opting not to match their respective central banks’ monetary policies. Canadian commercial banks are just a few more potentially joining the already swollen “rebel” ranks.
For the time being, there are no comments from the Bank of Canada on measures to be taken, if any, in case Canadian commercial banks were actually to rebel. However, there have been trinkets of information seeping through eve