Canada cuts rates further

The cut took rates to 2.25% and follows an unscheduled half-point reduction on 8 October in cooperation with other major central banks. The Bank of Canada is the first central bank to make a further cut since that coordinated move.

"The global economy appears to be heading into a mild recession, led by a US economy already in recession," the Bank of Canada said in a statement.

The bank hinted that it may cut further at the next scheduled announcement in December.

Initially, Canadian banks refused to pass on the rate cut of 8 October to their leading commercial rates. Most banks, however, did take in the cut after the government announced a 25 billion Canadian dollar (US$20 billion) bailout that will see the government buy up mortgages from banks.

Gloomy outlook for 2008 and 2009

"The marked tightening in Canadian credit conditions in recent weeks will restrain business and housing investment," the central bank said in a statement accompanying the decision.

The Bank of Canada now expects the country's economy to grow by only 0.6% this year and in 2009, before recovering to a 3.4% growth rate in 2010.

"The weaker outlook for global demand will increase the drag on the Canadian economy coming from exports," the bank stated. "Lower commodity prices will also dampen the outlook."

Click here to read the Bank of Canada's statement.