Why bank are slow to lower lending rates, but quick to hike them

Canada’s biggest banks raised their prime interest rates one after another this week following the Bank of Canada increase of its policy rate to 0.75 per cent from 0.5 per cent. The base lending rate at the Big Six now is 2.95 per cent, compared with 2.7 percent before the central bank’s announcement on July 12.

That’s how it is supposed to work. Except, the “transmission mechanism” between central bank to private banks isn’t always so automatic. When the Bank of Canada cut...

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