Econ Ch6 Carney May Cut Canada Interest Rate to Record 0.5% as GDP Drops

With the economy the way it is, many companies and businesses are not only doing what it takes to survive this recessionary quarter, but also to do what it takes to help keep us from a recession. It was reported on March 3, 2009 The Bank of Canada has slashed their 1% interest rate to an all-time low of 0.5%. This cut in the interest rate was decided upon by the Bank of Canada governor Mark Carney, which was only two days before the European Central Bank and Bank of England were going to cut to new lows as well.

http://www.bloomberg.com/apps/news?pid=20601082&sid=ay1nAkWkn47M&refer=canada

Because the unemployment rate is high, spending among consumers is very low. By lowering the interest rate, this would hopefully increase loans given, and give people more of a reason, which would ultimately increase spending, because in the end, the way to get out of this recession, ironically, is to spend. This is part of the monetary policy, whereby this will eventually be implemented among chartered banks all across Canada. Another reason for this interest rate would be the hopes of the money being loaned to be used to invest in businesses; this would help to slow down the unemployment rate, because there is more money in businesses to be expended.

Although I feel this plan is overall a good idea, there are many different ways people may spend this borrowed cash that may cause even more economic problems in the future for Canada. Remember, the whole reason for the US economy in turmoil is because of loaned cash from the government that was unable to be paid back by borrowers, because of bad investments. There will obviously be more changes to be made, but this was a much needed move by the Governments of Europe, England, Canada, and possibly the US.