Canada Lowers Main Rate to 4 Percent

The Bank of Canada lowered its main interest rate a quarter point, the second reduction in as many months, and signaled it will act again to shield Canada from a worsening economic slump in the U.S.

The target rate for overnight loans between commercial banks fell to 4 percent today, the lowest since May 2006.

Today's move may help preserve the longest economic expansion since World War II even as the U.S., Canada's biggest trading partner, slumps towards a possible recession. Canadian exports such as lumber and cars make up 30 percent of economic output, and about 80 percent of those sales are to U.S. customers. The rate cut also comes with less risk of quicker inflation, because the high Canadian currency has made imported goods cheaper.

Canada Lowers Main Rate to 4 Percent, Bloomberg
1/22/2008 10:31:21 AM