Bank of Canada reduces rates

by Richard Kilner

Story link: Bank of Canada reduces rates

Yesterday the Bank of Canada lowered interest rates by 50 basis points, as had been widely predicted.

The rate now stands at 3%.

In addition, the central bank reduced its growth forecast for this year from 1.8% to 1.4%.

However it has said it believes growth will increase to 2.4% in 2009.

The decline in expected growth this year is largely attributed to the worsening economic situation in the US, which will have immediate effects upon Canada.

This latest cut in rates means that since December interest rates have fallen by 1.5%.

Analysts believe that further cuts are likely over the course of the year.

However, Canadian banks have not immediately passed the rate cut onto their customers, as borrowing costs remain at a high level despite the half point cut.