FXstreet.com (Barcelona) - The Bank of Canada announced today that it has cut its main interest rate by half percentage point to 3.0%, the Bank Rate is now at 3.25%.
According to the Bank's press release, the global economic slowdown reflects a sharp slowdown in US economy, together with dislocations in global financial markets. Canadian economy has also noticed the slowdown, as the buoyant domestic demand has been offset by the decline in exports.
The Bank expects Canadian economy to grow by 1.4% this year and 2.4% in 2009, and 3.3% in 2010.
Inflation has been running at levels around 1.5%, the Bank calculates underlying inflation to be running around 2.0% a level, according to the Bank, in line with an economy that was operating just above its production capacity.
The Bank expects a deeper slowdown for US economy which will have consequences upon Canadian economy, as a further decline on exports will weigh on economic growth in 2008, furthermore, credit conditions will tighten, while business investment and consumer sentiment are expected to moderate, although the Bank believes that domestic demand is projected to remain strong, supported by firm commodity prices, high employment levels, and the effect of cumulative easing in monetary policy.