FXstreet.com (Barcelona) - 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, stated thee Bank of Canada in its first Monetary Policy report in 2009.
Major economies, including Canada's, according to the Bank, are into recession at the moment, while emerging economies have been seriously affected.
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.
Canadian exports have decreased sharply, and domestic demand is shrinking weighed by declines in real income, household wealth, and confidence.
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.
In this context, the Bank decided to lower its policy rate by 50 basis points to 1%, and reaffirms its commitment 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.