Canada cuts rates, govt to help to manufacturers

08 October 2008 15:15  [Source: ICIS news]

TORONTO (ICIS news)--Canada, in line with other major central banks, on Wednesday reduced its interest rates, cutting the country's overnight lending rate by 0.5 points to 2.5% to help support the economy amid the ongoing global financial crisis.

 

“In recent weeks conditions in global financial markets have deteriorated sharply, the US economy has weakened further, and commodity prices have fallen abruptly,” the Bank of Canada said.

 

As a result, credit conditions in Canada had tightened significantly, despite the relative health of the country’s financial institutions, the bank said.

 

Weaker growth in the US and other important trading partners would increase the drag on the Canadian economy coming from net exports, it added.

 

Analysts said the global rate cuts could help revive demand and prices in Canada's big commodities sectors.

 

In a related development, Prime Minister Stephen Harper on Tuesday revealed a Canadian dollar (C$) 400m ($360m) aid package to help manufacturers, particularly the automotive and aerospace sectors in Ontario and Quebec.

 

The package is as part of Harper's campaign platform to get his ruling Conservatives re-elected in federal elections on 14 October.

 

($1 = C$1.10)

 

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By: Stefan Baumgarten
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