Broker questioned the bank's refusal to match the overnight rate

Broker questioned the bank's refusal to match the overnight rate

Broker questioned the bank's refusal to match the overnight rate

 

"Over the years it has always been if the Bank of Canada rate drops by a quarter point, you will see the initial drop in a quarter point, but I think it really caught everyone by surprise that they really dropped because there's talk of last year that the rate will excellent ride and will increase, "The Roberts Group told Al Roberts of Dominion Lending Centres MortgageBrokerNews.ca.
One of the major banks have offered an explanation why interest rates are not in accordance with the Bank of Canada overnight rate, but the broker is not really for sale.
According to one analyst, the decision not to match the level of overnight done to ensure a healthy economy.
"The absence of full cut slow initial stimulus to the housing market at the end of the cycle, while the negative impact on the profitability of Canadian banks were blunted by the fact that it was only a partial step," Robert Sedran, an analyst at CIBC World Markets said in a note to clients, according to the Financial Post . "We'll see if it holds the balance or if another cut in the overnight rate to come."

Delay - and refusal to match the benchmark interest rate - is seen by some as an attempt to maintain the highest profit.
Bank of Canada lowers overnight rate by 25 basis points last week and all the banks lowered their prime rate by 15 basis points. It took almost a week after the bank's central bank lowered overnight interest rates to cut the main rate their own.
"On the one hand they were milking (client) on the other hand they have never seen this situation before; they were caught by surprise by the bank to lower interest rates and they refused to match it could be a case of banks pushed back a bit," said Michael Kafenzakis of Verico Groupe Conseil Hypotheque MortgageBrokerNews.ca. "In my forty years of experience, usually when the government drops their level of banks to follow. I guess in the next few months, they will come and bring their level down (to match the Bank of Canada rate). If not they just gouging."
However, the thought that smooth push-back by banks that are caught by the central bank unexpectedly cut interest rates - a move that captures many, including most economists Canada, off guard.