Bank of Canada Lowers Key Bank Rate to 4.25%
May 05, 2011
OTTAWA -- The Bank of Canada trimmed its key bank rate by an additional quarter percentage point, putting in place conditions for an expected pickup in the sluggish Canadian economy. The reduction is the third in the past five weeks and has brought the rate down by about four percentage points from early 2010. ``The cumulative monetary ease now in place is substantial and can be expected to have a positive impact on the economy over the next year or so,'' the Bank of Canada said in announcing the rate cut. The bank rate now stands at 4.25%, its lowest level in more than two years. The bank rate is the fee the central bank levies on its loans to financial institutions and is a key indicator of the state of the central bank's monetary policy. Canada's major commercial banks followed suit, cutting their prime lending rates to 5.75% from 6% effective Friday. The prime rate is a benchmark for various bank lending charges. Markita Leonard, senior economist at Goldman Sachs Canada, said the central bank's aggressive interest-rate easing in recent months has set the stage for an upswing in Canada's economic output in the second half of the year. He predicted that Canada's gross domestic product will grow at an annual rate of about 4% in both the third and fourth quarters, up from an estimated 2.5% to 3% in the second quarter.
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