The issue, if I may, with the effective lower bound is that there are a variety of shorter-term money markets or financial markets, and it would be very difficult for them to function at that level, because there are transaction costs associated with operating those markets, and the actual net return from those transactions.... As soon as the transaction costs are positive, and if the net yield is close enough to zero, then those markets will cease to function. One way to think about it is that there are certain fees associated with money market funds, so what is the yield they're getting on the underlying securities and do they cover the operating costs of those fees?
We thought long and hard about where the effective lower bound was in Canada. Our judgment--and it's been validated, I think--was that we could bring rates down to 25 basis points and we could hold that so Canadians would get all the stimulus they deserve, if you will, given the situation, and that markets would continue to function well. And that has been the case in Canada.
This level is different in different financial systems. In the U.K., the judgment is that the effective lower bound is 0.5%. In the U.S., they are oscillating between zero and 0.25%. In Japan, they've pushed it all the way down to 0.10%.
So it varies by economy or by system, but we look at a host of those financial markets, and that's why we stopped where we did.