Canada cuts lending rate to historic lowJanuary 21st, 2009 - 10:46 am ICT by IANS
Toronto, Jan 21 (IANS) With the credit crisis deepening and markets sinking, the Canadian central bank Tuesday cut its overnight lending rate to the historic low of one percent to stimulate the economy.This is the third interest cut announced by the Bank of Canada since the economic crisis began in September last year. The bank has also pumped billion of dollars into the system to ease credit supply.
Announcing the third cut, the central bank said the outlook for the global economy has deteriorated, with the financial crisis spilling over into the nation’s economic activity.
“Major advanced economies, including Canada’s, are now in recession and emerging-market economies are increasingly affected. Stabilisation of the global financial system is a precondition for economic recovery,” the bank statement said.
While exports are down sharply and domestic demand is shrinking, the bank said the real Gross Domestic Product (GDP) will drop by 1.2 percent this year.
However, it may rebound and grow by 3.8 percent next year as a result of policy actions and depreciation of the Canadian dollar, the bank said.
But Canadian markets continued to sink Tuesday, with energy stocks dragging down the Toronto Stock Exchange composite index by 336.55 point to close at 8,504.93.
The Canadian dollar - called loonie - also slipping against the US dollar, down 0.81 to close at 78.89 cents US.
Energy sector shares dived 6.8 percent, with Petro-Canada down $2.54 to $27.11, EnCana Corp $3.05 to $52.67 and Suncor Energy Inc $4.16 to $22.10.
The financial sector also retreated 5.8 percent, with the nation’s top Royal Bank down $1.76 to $30.84 and Manulife Financial $2.10 to $20.11. Online brokerage TD Ameritrade also slipped $2.80 to close at $39.42.
Other Canadian giants whose shares slipped lower were the BlackBerry maker Research In Motion and auto parts maker Magna.
While RIM shares lost 75 cents to close at $63 after a Canadian court Monday ordered its hostile takeover of an encryption technology company here.
Magna International, which is a global giant in auto parts, also lost $2.15 to end the day at $36.63.