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OTTAWA (Reuters) - The Bank of Canada unexpectedly cut its key interest rate on Tuesday by three-quarters of a percentage point to a 50-year low of 1.50 percent and declared the Canadian economy to be in a recession.
"While Canada's economy evolved largely as expected during the summer and early autumn, it is now entering a recession as a result of the weakness in global economic activity," the bank said in a statement. The global recession will be deeper and broader than previously expected, it added.
The last time Canada's central bank cut its overnight lending target rates this sharply was in October 2001 following the September 11 attacks in the United States.
Unlike previous statements, it did not say further monetary stimulus would be required. Instead, it said it would monitor developments "in judging to what extent further monetary stimulus will be required."
Canada has a couple of factors working in its favor, it said. A depreciation of the Canadian dollar will offset some of the impact of the global recession and ongoing and significant liquidity provision has led to improvements in money markets and overall credit conditions.
Reporting by Louise Egan; Editing by Randall Palmer