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The loonie is crashing after the Bank of Canada cuts rates

Jul 15, 2015, 19:36 IST

The Canadian dollar, also known as the loonie, has cratered to an 11-year low against the US dollar after the Bank of Canada cut its Overnight Rate 25 basis points to a record-low 0.50%, as expected.

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Post-announcement selling has the loonie lower by 1.4%, near 1.2915 per dollar.

Investing.com

In its statement, the Bank of Canada also lowered its economic outlook.

The BoC suggests the Canadian economy contracted slightly in the first half of the year but projects growth of just over 1% in 2015. It sees the economy strengthening to growth of 2.5% in 2016 and 2017.

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"The downward revision reflects further downgrades of business-investment plans in the energy sector, as well as weaker-than-expected exports of non-energy commodities and non-commodities," the statement said.

The BoC continued:

The lower outlook for Canadian growth has increased the downside risks to inflation. While vulnerabilities associated with household imbalances remain elevated and could edge higher, Canada's economy is undergoing a significant and complex adjustment. Additional monetary stimulus is required at this time to help return the economy to full capacity and inflation sustainably to target.

Earlier this week, we highlighted commentary that suggested Canada's economy was teetering on the edge, and it appears the Bank of Canada is prepared to take steps to stave off a deeper decline in economic activity.

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