OTTAWA - The Bank of Canada has chopped its key interest rate by another half percentage point to its lowest level ever, and warned that the Canadian economy will contract by 1.2 per cent this year.
The central bank's target for the overnight lending rate now stands at 1 per cent - lower than in 1958, when the most-watched policy rate was 1.12 per cent.
"The outlook for the global economy has deteriorated since the bank's December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity," the bank said in its gloomiest statement yet.
In separate announcements, Toronto-Dominion Bank and Bank of Montreal responded by announcing they have cut their prime lending rates by 50 basis points to 3 per cent. BMO said it is cutting key mortgage rates by 30 to 50 basis points. Canadian Imperial Bank of Commerce and Royal Bank of Canada announced a few minutes later that they, too, have cut their prime rate to 3 per cent from 3.5 per cent.
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