Canada cuts interest rate by a further 50bp

22 April 2008 17:54  [Source: ICIS news]

TORONTO (ICIS news)--The Bank of Canada on Wednesday cut its target for the overnight lending rate by another 50 basis points, to 3% and hinted at a further cuts, due to weaker global economic growth, the sharp slowdown in the US and ongoing dislocations in financial markets.


The US economy was set for a deep and protracted slowdown, with direct impacts for Canada’s export-dependent economy, the bank said, adding that further monetary stimulus may be required. Canadian chemical producers export two thirds of their production, most of it to the US.


Growth in Canada had moderated due to a fall in net exports but
domestic demand should remain strong, supported by high commodity prices and high employment levels, the bank said.


Canada’s economy was expected to grow 1.4% this year, 2.4% in 2009 and 3.3% in 2010, the bank said.


The bank has cut rates by a total of 150 basis points from 4.5% since December.


Analysts said the latest cut was in line with expectations, given the ongoing troubles in the important US market.  


Canada’s chemicals industry association said earlier it hoped rate cuts would weaken the strong Canadian dollar (C$).


The C$ was trading roughly at par with the US dollar after falling half a cent on Tuesday morning.

By: Stefan Baumgarten
+1 713 525 2653

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