As expected, the Bank of Canada cut its key benchmark-lending rate Tuesday by another 50 basis points, to a record low of 0.50 per cent, to spur an economy that it acknowledged is deteriorating at a faster pace than expected, and indicated it would, if required, begin buying back government bonds in an effort to stimulate the economy.
In what analysts are calling a “bold” statement, the central bank said the benchmark rate is to remain at the current level, or be cut further, until there are “clear signs” that the economy is on the path toward reaching its potential — which it now envisages won’t happen until early 2010, a signal that the downturn could be longer than expected.
Most commercial banks followed the Bank of Canada’s move, cutting their prime lending rates by 50 basis points to 2.50 per cent, effective Wednesday.
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