The Bank of Canada cut interest rates by 50 basis points as expected this morning, and economists see further cuts ahead.

On its final rate decision of 2001, the central bank cut 50 bps taking the key overnight rate down to 2.25%, and the Bank Rate to 2.50%, the lowest since mid-1960.

These are the lowest interest rates in a lifetime for the majority of the Canadian population. BMO Nesbitt Burns observes that the chartered banks’ prime rates are down to their lowest level since the Bank’s records begin in 1935.

The cumulative easing by the Bank so far this year is now 350 bps, spread over nine separate cuts. Exactly half of the total relief has been delivered since September 11, reinforcing the fact that the economic outlook shifted dramatically on that day. In the United States, the Federal Reserve Board has eased rates a total of 450 bps, with one more FOMC meeting on December 11.

“While leaving the door open for further cuts, there were some subtle signs of a toning down of the urgency,” says BMO. “They dropped the tag line that they would ‘monitor developments closely’ and also suggested that the cumulative easing was ‘a substantial amount of monetary stimulus’.”

The central bank’s next decision date is on January 15, 2002. “While a lot will unfold by that time, it is reasonable to assume that the Bank will match whatever the FOMC does in December, with a 25 basis point trim the most likely step.”