As the global financial crisis continues, many companies and consumer face an apparent economic paradox.
While central banks in many industrialized countries chop short-term interest rates to boost economic growth, what it costs to borrow money to buy a house or a car will likely rise in the coming months.
On Wednesday, five central banks — the U.S. Federal Reserve Board, the Bank of Canada, the Bank of England, the European Central Bank and Sweden's Riksbank — all cut their near-term borrowing rates by half of a percentage point.
Car loan rates likely to rise as cost of cash jumps (David Zalubowski/Associated Press)
That followed Tuesday's breathtaking reduction of one full percentage point by the Reserve Bank of Australia.
The government banks are trying to reduce borrowing costs for other financial institutions and repair the increasingly illiquid capital markets around the globe.
"Interbank lending is essentially frozen," federal Finance Minister Jim Flaherty said Thursday in Ottawa.
Canada's central bank rate has set its target for overnight lending at 2.5 per cent while the U.S. Federal Reserve's fed funds rate now is pegged at 1.5 per cent.
At almost the same time, however, the TD Bank hiked what it charges on variable-rate mortgages, a move many analysts expect to be mimicked by other banks.
Read the whole story here: http://www.cbc.ca/money/story/2008/10/08/f-interestrates.html
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