FXstreet.com (Barcelona) - The Bank of Canada has released its decision to lower its overnight bank rate by a half percentage point to 1% in the light of a deteriorating economic situation and a worsening financial crisis.
The financial crisis, according to the Bank's statement has spilled over the real economic activity and business and household confidence are being undermined worldwide by heightened economic uncertainty. Canadian economy, in line with major economies, has entered into recession.
Economic recovery requires action to stabilize the global financial system, therefore, the Bank observes the need for governments and central banks to take bold and concerted policy actions, although, the Bank recognizes, it will take some time before financial conditions normalize.
The Bank forecasts further economic contraction in 2009, with GDP contracting at an average year on year pace around 1.2%, and, with the support of the appropriate policy actions and the depreciation of the Canadian Dollar, Real GDP is expected to rebound to grow at 3.8% pace in 2010.
The Bank ends its press release by committing to continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the 2 per cent target over the medium term.