More on the Bank Rate Decision
April 22, 2008
BANK OF CANADA CUTS O/N RATE 50 BP TO 3 PCT, SAYS FURTHER MONETARY STIMUILUS WILL LIKELY BE REQUIRED
BOC DROPS PREVIOUS REFERENCE TO "NEAR TERM" WHEN SAYING FURTHER MONETARY STIMULUS TO BE REQUIRED
BOC SAYS TIMING OF FURTHER RATE CUTS WILL DEPEND ON EVOLUTION OF GLOBAL ECONOMY, DOMESTIC DEMAND
BOC NOW PROJECTS A DEEPER, MORE PROTRACTED U.S. ECON SLOWDOWN, WITH "DIRECT CONSEQUENCES" FOR CANADA
BOC CUTS 2008 GDP GROWTH OUTLOOK TO 1.4 PCT VS 1.8 PCT IN JAN; SEES 2009 AT 2.4 PCT VS 2.8 PCT PREV
BOC SAYS CORE, TOTAL CPI TO MOVE UP TO 2 PCT TARGET IN 2010; PREVIOUSLY SAID BY END-2009
BOC SEES DOWNWARD PRESSURE ON INFLATION THROUGH 2009; SAYS RISKS TO NEW INFLATION OUTLOOK BALANCED
BOC SEES ECONOMY MOVING INTO EXCESS SUPPLY IN Q2 2008, COMING BACK INTO BALANCE IN MID-2010
BOC SAYS TIGHTER CREDIT, SOFTER SENTIMENT TO MODERATE BUSINESS INVESTMENT, CONSUMER SPENDING
BOC SEES STRONG DOMESTIC DEMAND, BUOYED BY HIGH COMMODITY PRICES, JOBS AND EFFECT OF MONETARY EASING
BOC JUDGES UNDERLYING INFLATION TREND OF ABOUT 2 PCT; CONSISTENT WITH ECONOMY AT JUST ABOVE CAPACITY
Bank of Canada cuts rates by 50 bp, signals more
OTTAWA, April 22 (Reuters) - The Bank of Canada cut its benchmark interest rate on Tuesday by a half-percentage point to 3 percent, as expected, and signaled that further easing was required but suggested it might pause before cutting again.
In a statement which projected a steeper U.S. economic downturn that would dampen Canadian growth, the bank said "further monetary stimulus will likely be required," but dropped a previous reference to the need for more cuts in the "near term."
"Given the cumulative reduction in the target for the overnight rate of 150 basis points since December, the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in Canada," the central bank said.
The bank pushed back the time frame for inflation to move back up to its 2 percent target to 2010 from end-2009 and for the economy to move back into balance to mid-2010 from early 2010. It said the economy was operating above capacity now but would move into excess supply in the second quarter of 2008.
Tighter credit conditions and weakening confidence will likely weaken business investment and consumer spending, the bank said. However, it sees domestic demand staying strong due to high commodity prices, a vibrant labor market and the effect of cumulative interest rate cuts.