Canada may well be in a recession, but it’s unlikely that a further rate cut will do much to help spark growth, according to report from CIBC World Markets Inc. (CIBCWM) published on Friday.

A technical recession, which is generally defined as two successive quarters of economic contraction, is “a real possibility” for Canada, writes Benjamin Tal, CIBCWM deputy chief economist, in the report.

As a result, the market now sees the prospect of a rate cut on July 15 as a 50-50 proposition, he writes, yet, “With rates already so low, one must question the effectiveness of another rate cut.”

For one thing, another rate cut may not prompt much of a reaction from the banks, Tal writes. And, even if they do respond with lower lending rates, it’s not clear that this would do much to spur recovery. “If you need to borrow you are already in the market and another 25 basis points (bps) will do little to make or break a financing decision,” Tal writes.

Moreover, corporate credit is already growing by 8.7% year over year, Tal notes. “And so far, the money that is borrowed goes largely to cash as opposed to investment and thus adds little to economic growth.”

Similarly, on the consumer side, another 25 bps isn’t likely to make much difference to borrowing, Tal notes. “The surprise rate cut by the Bank in January did little to accelerate credit growth [among consumers],” he writes.

“Rate cuts by the Bank of Canada are more effective at the higher end of the rate spectrum — where sub-primers reside,” Tal concludes. “So any further cuts by the Bank might fuel borrowing exactly where it’s not needed.”

Lower rates would likely further weaken the loonie a bit, but CIBC says, “that’s not [a] game-changer by any stretch of the imagination.”

“Perhaps monetary policy is as loose as it can be and it’s time for fiscal policy to lend a hand,” it concludes. “For now however, it seems that for the federal government, balancing the books is more important than helping a central bank that gets more and more depleted with every basis-point of easing.”