Today, the Bank of Canada today announced that it is lowering its target for the overnight rate by one-half of a percentage point to 1/2 per cent in what is expected to be the last such conventional easing from the Bank.
This aggressive move by the Bank of Canada stems from the continued presence of the world-wide credit crunch which has immobilised the global financial system and has led to a rather bleak outlook for the global economy. The expectation is that the stabilization of the global financial system has potential delays whilst the ambitious plans of some major countries take some time to have the desired effect in addressing toxic assets and recapitalizing financial institutions. Added to this toxic mix is the fact that consumer and business confidence is extremely low. The effects of the recent aggressive monetary and fiscal policy actions in Canada and other major economies will begin to be felt in the second half of this year and will build through 2010.
The next scheduled date for announcing the overnight rate target is set for April 21, 2009.