The Bank of Canada today lowered its Bank Rate by ¼ of one percentage point to 5½ per cent. The Bank's operating band for the overnight rate was similarly adjusted to a range of 5 to 5½ per cent.

This decrease in short-term interest rates follows yesterday's move by the U.S. Federal Reserve to lower the federal funds rate by ¼ of one percentage point to 5 per cent. The action by the Federal Reserve was taken to sustain economic growth against a backdrop of growing caution by U.S. lenders and unsettled conditions in financial markets more generally.

Given the implications of these U.S. economic and financial market developments, and in the context of low and stable inflation in Canada, a similar ¼ of one percentage point decline in Canadian short-term interest rates was judged appropriate.