Bank of Canada cuts rate to 1.5 percent

The Bank of Canada reacted to the global economic crisis Tuesday by lowering its key interest rate by three-quarters of a percentage point to 1.5 percent.

The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated, the bank said in its release. While Canada’s economy evolved largely as expected during the summer and early autumn, it is now entering a recession as a result of the weakness in global economic activity.

The last time the key lending rate was this low was in July 1958. The Globe and Mail said the last time the bank cut its key rate so drastically was in the aftermath of the U.S. terrorist attacks of September 2001.

The bank said one favorable economic factor was the depreciation of the Canadian dollar, which it said will provide an important offset to the effects of weaker global demand and lower commodity prices.

Soon after the central bank’s news, TD Canada Trust issued a statement saying it was lowering its prime lending rate by 50 basis points to 3.5 percent effective Wednesday.