Bank of Canada lowers overnight rate target by 3/4 percentage point to 1 1/2 per cent - Bank of Canada
Central bank: boc | Type: statement | Date: 2008-12-15

FOR IMMEDIATE RELEASE
Media Relations
Ottawa, Ontario
December 9, 2008
The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated. Global financial markets remain severely strained. Measures taken by major governments are beginning to encourage credit flows, although it will take some time before conditions in financial markets normalize. In addition, a series of recently announced monetary and fiscal policy actions will also support global economic growth.
While Canada's economy evolved largely as expected during the summer and early autumn, it is now entering a recession as a result of the weakness in global economic activity. The recent declines in terms of trade, real income growth, and confidence are prompting more cautious behaviour by households and businesses.
All of these factors imply a lower profile for core inflation than had been projected at the time of the last
Monetary Policy Report
in October.
Several factors are helping to counterbalance the negative drag from the global economic and financial developments. The depreciation of the Canadian dollar will continue to provide an important offset to the effects of weaker global demand and lower commodity prices. As well, money markets and overall credit conditions in Canada are responding to significant and ongoing efforts to provide liquidity to the Canadian financial system.
The Bank will 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 inflation target over the medium term.
Information note:
A full update of the Bank's outlook for the economy and inflation, including risks to the projection, will be published in the
Monetary Policy Report Update
on 22 January 2009.