The Bank of Canada warned today the recession will be longer and deeper than expected, but refused to use the word depression, and has halved its benchmark interest rate to 0.25 per cent and said it will likely remain at that level until the middle of 2010.The Bank says the recession in Canada "will be deeper than anticipated" and recovery will be delayed until the fourth quarter of this year, prompting the bank to slash its economic forecast. It now says Canada's GDP will shrink by 3 per cent this year, followed by an estimated growth of 2.5 per cent in 2010 and 4.7 per cent in 2011.
That 3% shrinkage is more than double the bank's more optimistic January '09 forecast for a contraction of 1.2 per cent this year.
The U.S. Federal Reserve cuts its interest rate to ZERO back in December 2008.
Canada's chartered banks, including the Toronto Dominion Bank, the Canadian Imperial Bank of Commerce, the Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Laurention Bank of Canada, quickly lowered their prime rates by one-quarter of a percentage point to 2.25 per cent. The prime rate influences interest rates on many consumer loans such as lines of credit and variable-rate mortgages.
In Canada there has been 357,000 net job losses since October 2008.
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