The Bank of Canada, for the second time in eight weeks, slashed its policy-setting interest rate by one-half of a percentage point, bringing it down yesterday to 3 per cent from 3.5 per cent.
But commercial banks, squeezed by a nine-month-old credit crunch, waited until late in the day to follow the central bank’s lead by chopping prime lending rates.
Prompted by a 50 basis point cut by Caisse centrale Desjardins, TD Canada Trust became the first major bank to lower its rate by the same amount to 4.75 per cent nearly an hour after the close of financial markets. Within an hour, its rivals including the Royal Bank, Bank of Montreal, the Bank of Nova Scotia and the CIBC all followed suit with a similar decrease, effective today.
In January, market watchers were sent into a tizzy after published reports suggested that some big banks were mulling whether to keep their prime rates unchanged even if the central bank cut its interest rate.