Bank of Canada says more rate cuts likely needed

Wed Nov 12, 2008 11:08am EST
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OTTAWA (Reuters) - The Bank of Canada is likely to have to cut interest rates again to reach its 2 percent inflation target over the medium term, Deputy Senior Governor Paul Jenkins said on Wednesday.

The central bank cut its interest rate by 50 basis points on Oct 8 and by a further 25 basis points on Oct 21, bringing it down to 2.25 percent.

"Some further monetary stimulus will likely be required to achieve our 2 percent inflation target over the medium term," Jenkins said in the prepared text of a presentation to a conference in Toronto.

The presentation repeated many of the projections that the bank made on October 21 and also when it released its quarterly monetary policy report on Oct 23.

Jenkins said inflationary pressures are expected to ease significantly, with core inflation staying under 2 percent until the end of 2010. It is currently 1.7 percent.

He said the economy would only grow sluggishly through the first half of next year before picking up pace and accelerating to above potential growth in 2010.

(Editing by Peter Galloway)