Toronto, April 22 (Inditop) Warning that the current recession could deepen, the Bank of Canada Tuesday cut its overnight rate to a historic low of 0.25 percent in an ominous sign for an economy expected to contract by three percent in 2009.
The Canadian government has planned multi-billion-dollar package to stimulate the economy, but it shows no hints of revival. More than 350,000 people have lost jobs since October, pushing the unemployment rate to more than 7.7 percent – the worst the early 1990s.
Announcing the cut, the central bank said, “While more aggressive monetary and fiscal policy actions are under way across the G20 (nations), measures to stabilize the global financial system have taken longer than expected to enact.
“As a result, the recession in Canada will be deeper than anticipated, with the economy projected to contract by 3.0 per cent in 2009. The bank now expects the recovery to be delayed until the fourth quarter and to be more gradual.”
As “deteriorating credit conditions have spread quickly through trade, financial, and confidence channels,” the bank said it was taking all possible monetary steps to ease the situation.
Since the economic crisis started, Canada’s national bank has thrice lowered its overnight rate and pumped billions of dollars into the system to ease credit crunch.
Considered to be the most robust among G8 economies till the crisis began, Canada has been hit the hardest by the US meltdown as its big neighbour south accounts for more than 85 percent of its trade.
Canada’s auto, manufacturing, oil and gas and lumber industries which are deeply linked to the US, are in a major slump, with no signs of any recovery.