22 Apr 2009

Bank of Canada cuts interest rate to record low

11:53 am on 22 April 2009

The Bank of Canada has cut its interest rate to 0.25% - its lowest ever.

The bank says it's prepared to keep it there for another full year in an aggressive bid to spur the economy.

The rate was previously 0.5%. In an unusual move, the bank told markets directly to expect rates to stay at the current level until the end of the second quarter of 2010, assuming inflation remains low.

The bank also cut its economic growth forecasts to reflect its view the Canadian recession will be deeper, and any recovery more gradual, than previously predicted.

Nonetheless, it suggested its cumulative rate cuts since December 2007 may be sufficient to help turn the economy around.

The cut took markets by surprise and triggered an immediate fall in the Canadian dollar against the US dollar to a three-week low.