BoC lowers overnight rate by 0.25%
The Bank of Canada (BoC) lowered their overnight rate by a further 0.25% to 2.25% at their scheduled meeting today. This brings a 0.75% cut to the overnight rate in the last 2 weeks.
The BoC cited 3 major interrelated aspects that have profoundly and negatively impacted the Canadian economy:
- The widening and deep global financial crisis has led to severe liquidity issues in financial markets.
- It appears as though the global economy is heading into a mild recession and,
- Commodity prices are in free-fall.
The BoC expects growth to be sluggish through the 1st quarter of next year and then to improve throughout the remainder of 2009 with above-potential growth in 2010 (3.40% growth in GDP).
Canada's economy and strong financial system will benefit from the actions of the G7 countries to stabilize their economies.
What is most pertinent to note in the BoC announcement of today is that they see core inflation dropping to below 2% through 2010 and total CPI dropping to below 1% in 2009 and moving up to 2% by the end of 2010. Furthermore, the BoC anticipates that further monetary stimilus may be required (i.e. potential for a further rate drop).
The next scheduled meeting for the BoC is set for December 9, 2008.
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