As expected, the Bank of Canada announced Wednesday that it is lowering its target for the overnight rate by one-quarter of one percentage point to 2.75%.

The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 3%.

In a statement, the bank said inflation pressures have continued to ease since its last announcement in July.

The bank said core inflation has declined below its 2% inflation target, and it appears that lower inflation will persist over the coming months.

The bank said that despite such recent set backs to the economy from SARS, mad cow, the power black out in Ontario and forest fires in British Columbia,, there are clear indications that conditions are in place for a strengthening of economic growth.

The Bank of Canada’s next rate announcement is set for October 15, but several economists have said they don’t see the bank altering rates through the remainder of the year.

“We don’t see any rate cuts after today, as the U.S. recovery will help drag Canada out of its current funk,” BMO Nesbitt Burns economist David Watt said in a commentary.

RBC Financial also said that the Bank of Canada made it quite clear that they have finished cutting rates. “It is rare for central banks to be quite as lucid in their policy objectives as what is indicated in the choice of wording used in the Bank of Canada’s announcement.”

TD Bank said that the emphatic tone of the central bank’s press release is bound to “raise a few eyebrows, and will certainly crush any lingering expectations that further easing could be in the cards”. TD said that the Bank cut rates because of weak inflation, not growth worries.

Bank of Montreal said that it expects overnight rates to begin rising in April 2004 towards a more neutral level of 4.50% by the middle of 2005.