Bank of Canada lowers overnight rate target by 1/2 percentage point to 3 1/2 per cent



    OTTAWA, March 4 /CNW Telbec/ - The Bank of Canada today announced that it
is lowering its target for the overnight rate by one-half of one percentage
point to 3 1/2 per cent. The operating band for the overnight rate is
correspondingly lowered, and the Bank Rate is now 3 3/4 per cent.
    Information received since the January Monetary Policy Report Update
(MPRU) indicates that economic growth in Canada through the four quarters of
2007 was broadly in line with expectations. Domestic demand has remained
buoyant, as rising commodity prices and high employment have continued to
support income growth. Canada's net exports weakened further in the fourth
quarter, reflecting the slowing U.S. economy and the impact of the past
appreciation of the Canadian dollar. Overall, the Canadian economy remained
above its production capacity at year-end. Core and total CPI inflation - at
1.4 per cent and 2.2 per cent, respectively, in January - have also been
consistent with the Bank's expectations.
    At the same time, there are clear signs that the U.S. economy is likely
to experience a deeper and more prolonged slowdown than had been projected in
January. This stems from further weakening in the residential housing market,
which is adversely affecting other sectors of the U.S. economy and
contributing to further tightening in credit conditions. The deterioration in
economic and financial conditions in the United States can be expected to have
significant spillover effects on the global economy. These developments
suggest that important downside risks to Canada's economic outlook that were
identified in the MPRU are materializing and, in some respects, intensifying.
    The Bank now judges that the balance of risks around its January
projection for inflation has clearly shifted to the downside, and, as a
result, the Bank is lowering the target for the overnight rate. Further
monetary stimulus is likely to be required in the near term to keep aggregate
supply and demand in balance and to achieve the 2 per cent inflation target
over the medium term.
    The Bank will publish a new projection for the economy and inflation,
including risks to the projection, in the Monetary Policy Report on 24 April
2008.

    Information note:

    The Bank of Canada's next scheduled date for announcing the overnight
rate target is 22 April 2008.




For further information:

For further information: Jeremy Harrison, (613) 782-8782


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