Bank of Canada Cuts Interest Rates to 3 percent

The Bank of Canada reduced its key lending rate by half a percentage point to 3 percent.

Despite the country being gripped by a fear of an economic slowdown leading to recession like the US economy, the credit crunch has had a lesser effect of Canadian businesses in comparison to those over the border.

The global economy has weakened and growth has stalled causing the uncertainty in the global financial markets the depression has hit the Canadian economy in terms of both consumer spending and exports.

The BoC predicts that the economy will grow steadily at a rate of 1.4 percent this year but will reach 3.3 percent by 2010.

A further analysis of the financial developments, trends and implications will be published on 24 April 2008 in the Bank’s Monetary Policy Report.

The role of the central bank is primarily to control inflation as the rate last much was just 1.4 percent, which is well below the target rate of 2 percent, especially considering the current climate of global inflationary pressures.

The recent price-level adjustments on cars as well as changes in indirect taxes have helped to keep inflation on target.

The Bank of Canada is anticipating and deeper but more drawn out slowdown than what is being experienced across the border.

Although the current excess supply within the economy should cushion the pressure on inflation through to next year.

Story link: Bank of Canada Cuts Interest Rates to 3 percent