BOC Lowers Rates

Last week, the Bank of Canada lowered its benchmark interest rate by 50 basis points, to 3.50%.  Though the move was widely anticipated by analysts, whose only uncertainty was whether the bank would cut 50 bps or 25 bps, investors nonetheless punished the Canadian Dollar. The reason cited by the Central Bank in its press release accompanying the rate cut was a sagging economy, due in part to a more expensive Loonie and the concomitant decline in exports. In addition, the Bank indicated that it will likely have to cut rates further over the next few months in order to avoid recession.  In short, it doesn’t look like the Canadian Dollar will upstage its 17% rise in 2007. Bloomberg News reports:

The central bank "has some very dovish words for the Canadian economy.  Retaining the full easing bias and saying the risks to growth are intensifying have caught investors’ attention.”

Read More: Canada Dollar Falls as Bank Reduces Rate, Signals It’s Not Done