OTTAWA - The Bank of Canada is widely expected to slash its key interest rate by another half-point tomorrow to 1.75 per cent, taking the trendsetting rate to the lowest level since 1960. But private-sector economists say that won't be the end of it.
With the risk of a deep recession worsening, central banks around the world -- including Canada's -- are wondering how low they need to go to put enough stimulus into the system to start turning economies around.
Scotia Capital's Derek Holt says no one would be surprised to see Bank of Canada governor Mark Carney chop short-term interest rates by three-quarters of a point, and then keep going until the bank's target for the overnight rate is at one per cent by spring.
In the U.S., many economists see the Federal Reserve cutting the cost of short-term funds for commercial banks to zero, and also printing more money, in an effort to spur lending in a system seized by fear.
In Canada, the central bank's action in halving the overnight rate has been matched by the chartered banks, easing real-world rates for many businesses and households. Still, Carney's actions have not steered Canada clear of the oncoming recession.
Amid evidence that the situation is deteriorating -- including 71,000 job losses last month -- economists say Carney won't let worries about future inflation hold him back from bold action.
