Canada reduces interest rate by 75 basis points to 1.50%. | CountingPips Forex Blog

December 9, 2008 - Forex Economic News

Canada reduces interest rate by 75 basis points to 1.50%.

The Bank of Canada reduced its interest rate by 75 basis points to 1.50 percent today according to a government release. The rate cut comes after the Bank lowered their interest rate by a total 75 basis points in two separate reductions in October and takes the rate to CAD forex its lowest standing in 50 years. Today's reduction surpassed market forecasts as expectations were for a 50 basis point cut.

The BOC cited weakening economic growth, a global economic slowdown and tightened credit levels as reasons for the rate cut. The bank also stated that the Canadian economy is "now entering a recession as a result of the weakness in global economic activity."

The report commented that, "The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated. Global financial markets remain severely strained. Measures taken by major governments are beginning to encourage credit flows, although it will take some time before conditions in financial markets normalize."

The BOC left open the possibility of further rate cuts as it said in the report that the "Bank will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the 2 per cent inflation target over the medium term." Canada's October consumer price index registered an annual increase of 2.6 percent while the core cpi registered a 2.0 gain.

The next rate decision for the Bank of Canada is coming on January 20.

tags: interest rates, CAD, Canada, economy

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