The Bank of Canada cut its key interest rate on Tuesday by a quarter point, less than expected, to 2.25 percent but it said it would likely have to ease credit further to combat the effects of the global financial crisis. The Canadian dollar dropped 1.38 cents US on Tuesday after the Bank of Canada moved to cut interest rates again, citing the global financial crisis and economic worries. As a result of Tuesday's move, the Bank of Canada overnight rate stands at 2.25 per cent. The Canadian central bank had joined in a half-point coordinated rate cut by the Federal Reserve, the European Central Bank and other major central banks on October 8 in an extreme action to combat the global financial crisis.
Many economists had recommended a reduction of half a point, but the more moderate cut might make it easier for Canada's big banks to follow through and pass on the lower rate to customers. Canada's private banks initially declined to pass on to consumers the full half percentage-point cut in interest rates announced by central banks around the world on Oct. 8 that affected Canadians' ability to get or afford loans for mortgages and businesses.
The bank expects average annual growth in real gross domestic product of only 0.6 per cent in both 2008 and 2009, before moving up to 3.4 per cent in 2010.
Many economists had recommended a reduction of half a point, but the more moderate cut might make it easier for Canada's big banks to follow through and pass on the lower rate to customers. Canada's private banks initially declined to pass on to consumers the full half percentage-point cut in interest rates announced by central banks around the world on Oct. 8 that affected Canadians' ability to get or afford loans for mortgages and businesses.
The bank expects average annual growth in real gross domestic product of only 0.6 per cent in both 2008 and 2009, before moving up to 3.4 per cent in 2010.
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