UPDATE 1-Canada banks cut prime rates by 50 basis points
Tue Mar 3, 2009 10:35am EST
*BMO leads the pack, cuts prime to 2.5 percent
*Other banks also match Bank of Canada rate cut
March 3 (Reuters) - Canadian banks cut their prime lending rates on Tuesday after the Bank of Canada, the country's central bank, cut its key interest rate by a half-point to a record low of 0.5 percent.
The banks showed no reluctance to pass along the full 50- basis-point reduction in the Bank of Canada's overnight rate, in contrast to their more cautious approach in the autumn.
Bank of Montreal (BMO.TO: Quote, Profile, Research, Stock Buzz) led the pack in lowering its prime rate to 2.5 percent from 3.0 percent.
The other larger players -- Royal Bank of Canada (RY.TO: Quote, Profile, Research, Stock Buzz), Canadian Imperial Bank of Commerce (CM.TO: Quote, Profile, Research, Stock Buzz), TD Canada Trust (TD.TO: Quote, Profile, Research, Stock Buzz) and National Bank of Canada (NA.TO: Quote, Profile, Research, Stock Buzz) -- also cut their prime rates to 2.5 percent.
The Bank of Canada cut its key interest rate as expected, and signaled for the first time that it may resort to quantitative easing in the future.
The central bank also acknowledged that its latest projections for the Canadian economy now look optimistic in the light of the latest economic data, showing that the economy contracted at an annualized rate of 3.4 percent in the fourth quarter.
The prime rate determines what banks charge on a host of loans and credit products, including some mortgages.
Canadian bank stocks rose in early trade on Tuesday but some of them later turned lower following a drop in Toronto's main stock index .GSPTSE.
(Reporting by Chakradhar Adusumilli in Bangalore, Editing by Dinesh Nair)
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