Banks drop overnight rate to 0.25 percent

[refutor]

http://finance.sympatico.msn.ca/investing/news/businessnews/article.aspx?cp-documentid=19310403

The article says that the major banks will cut their prime rate to 2.25%

[CanadianCapitalist]

The Bank's statement can be seen here:

Bank of Canada lowers overnight rate target by 1/4 percentage point to 1/4 per cent and, conditional on the inflation outlook, commits to hold current policy rate until the end of the second quarter of 2010 (http://www.bankofcanada.ca/en/fixed-dates/2009/rate_210409.html)

For me at least, I can't recall the last time when the Bank worded the press release like it did:

Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.

[FrugalTrader]

BMO dropped their prime rate by 0.25% first, and the others have followed:
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2009/04/bmo-cuts-prime-14.html

[Canadian Finance]

CC, that's the part I picked up on too, over a year at this rate?

To be fair though, "Conditional on the outlook for inflation", isn't that just saying that if they think inflation is going up then so will the rates? Wasn't that always the expectation, that rates will go up when inflation does?

[Robillard]

Given that inflation was 1.2% in the year to March 2009, and there seems to be plenty of slack in the economy (rising unemployment and factory closures) it's not surprising that the Bank of Canada feels it can drive short term interest rates down to practically zero. If inflation expectations get any lower, I wouldn't be surprised if the Bank of Canada resorts to the "quantitative easing" strategies employed by other central banks, since it is its stated policy to keep inflation between 1 and 3%.

Here's a question: Do you think it is right for the Bank of Canada to employ inflation targetting? Is the 1-3% range with a 2% target reasonable?