The central bank of Canada, Connecticut’s largest trading partner, cut its key interest rate by three-quarters of a percentage point today, saying the country is entering a recession as a result of global weakness.
It is the largest cut in the overnight rate since October 2001 in the aftermath of the Sept. 11 attacks and brings the key rate to the lowest level since 1958.
The cut to 1.5 percent follows two reductions in October that lowered the rate by 75 basis points, or 0.75 percentage points.
The Bank of Canada said the outlook for the world economy has deteriorated significantly, and the global recession will be broader and deeper than previously anticipated.
“Global financial markets remain severely strained,” the bank said in a statement.
The consensus of economists was for a half-point cut, but many also speculated that bolder action may be required.
The lower interest rates, if passed on by Canada’s big commercial banks, encourage businesses and households to borrow and spend, thereby stimulating economic activity. (AP)
