Bank of Canada reduces Lending Rate

Bank of Canada announced today the reduction of lending interest rates by 0.5%.

OTTAWA – The Bank of Canada today announced that it is lowering its target for the overnight rate by one-half of a percentage point to 3 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 3 1/4 per cent.

The U.S. subprime mortgage crisis played as a factor in the decision, the bank commenting that growth in the global economy has weakened, reflecting the effects of a sharp slowdown in the U.S. economy and ongoing dislocations in global financial markets. Growth in the Canadian economy has also moderated as buoyant growth in domestic demand, supported by high employment levels and improved terms of trade, has been substantially offset by the fall in net exports. While both total and core CPI inflation were running at about 1.5 per cent at the end of the first quarter, the underlying trend of inflation is judged to be about 2 per cent, consistent with an economy that was operating just above its production capacity.

The Bank projects that the Canadian economy will grow by 1.4 per cent this year, 2.4 per cent in 2009, and is expected to balance out at 3.3 per cent in 2010.

For the full story see http://www.bankofcanada.ca/en/fixed-dates/2008/rate_220408.html