TORONTO (Reuters) - The Bank of Canada unexpectedly cut its key interest rate by 50 basis points to 2.50 percent on Wednesday in a coordinated effort with other central banks in a bid to calm ailing financial markets.
In a statement that left the door open to further rate cuts, the Bank of Canada said the intensification of the global financial crisis is impacting all countries and that conditions in global financial markets have fallen hard in recent weeks.
"In recent weeks conditions in global financial markets have deteriorated sharply, the U.S. economy has weakened further, and commodity prices have fallen abruptly," the Bank of Canada said in a statement.
"As a result of these developments, credit conditions in Canada have tightened significantly, despite the relative health of our financial institutions."
The decision to lower its key rate ahead of a scheduled interest rate announcement on October 21 came along with rate cuts from central banks across the world, including the U.S. Federal Reserve, European Central Bank, Bank of England and People's Bank of China.
The Bank of Canada also said it will continue to monitor economic and financial developments, along with the evolution of risks, to judge whether further action may be required to achieve its 2 percent inflation target over the medium term.
While the Bank of Canada said it would continue to assess whether more rate cuts would be required, some market experts felt the latest easing may be enough.
"Given our growth outlook that things will improve as we go forward we don't think there's any need for further ease depending on how well this is received," said Craig Wright, chief economist at Royal Bank of Canada. "One hopes this is well received given that most central banks are on the same page."
Reporting by Frank Pingue, Additional reporting by Jennifer Kwan