The Bank of Canada announced today that it had lowered its interest rate by 25 basis points from 0.50 percent to 0.25 percent and may hold the rate there for over a year. Today’s rate cut was unexpected as market forecasts were predicting the BOC was going to hold the rate steady. The BOC has now lowered the interest rate by 425 basis 
points since December 2007 to its present record low level. The BOC said that the interest rate may stay at 0.25 percent until the end of the second quarter of 2010 depending on the outlook for inflation as the BOC targets 2 percent inflation.
The BOC statement commented on the Canadian economic situation saying, “the recession in Canada will be deeper than anticipated, with the economy projected to contract by 3.0 per cent in 2009. The Bank now expects the recovery to be delayed until the fourth quarter and to be more gradual.”
The statement also said that the Bank is projecting GDP growth rates of 2.5 percent in 2010 and 4.7 percent in 2011 and that core inflation should fall in line with the 2 percent target by the third quarter of 2011.
Read the full BOC statement here. The next BOC rate decision is scheduled for June 4th.
Canadian Dollar loses ground in Forex Trading.
The Canadian “loonie” dollar lost ground today in the forex market after the unexpected rate reduction announcement. The U.S. dollar has advanced against the Canadian loonie as the USD/CAD gained from its 1.2376 opening at 00:00GMT to trading at 1.2395 at 11:35am EST in the US session according to currency data from Oanda. The USD/CAD reached an intraday high of 1.2505 before retreating lower.
The euro has also gained against the loonie as the EUR/CAD trades at the 1.6073 level after opening the day at 1.6012 and reached an intraday high of 1.6161. The loonie has managed to shed early losses versus the Japanese yen to trade higher today as the CAD/JPY has edged up to the 79.48 yen per loonie level after opening at 79.38.
The British pound has gained versus the loonie as the GBP/CAD has climbed to the 1.8154 level after opening at 1.7997.
The Australian dollar is higher against the loonie as the AUD/CAD pair trades at 0.8779 from today’s opening rate of 0.8684 while the New Zealand dollar has also advanced as the NZD/CAD trades at 0.6956 from 0.6876 earlier today.
AUD/CAD Chart – The AUD/CAD advancing higher today in forex trading after falling yesterday(30-min. Chart).
