The Bank of Canada today lowered its Bank Rate by ¼ of one per cent to 4¾ per cent. The associated operating band for overnight interest rates was similarly reduced. The Bank's target for the overnight rate is now 4½ per cent, the centre of the new operating band.

The situation in international financial markets has improved considerably in recent months; however, there are still significant uncertainties facing the global economy. Economic growth in the United States continues to exceed expectations, but price and cost pressures in the U.S. economy continue to be contained by productivity gains and a competitive global environment. Inflation remains subdued worldwide.

In Canada, economic activity has been showing signs of increased upward momentum, and domestic financial markets have taken a more positive tone. At the same time, the trend of inflation has remained at the lower end of the Bank of Canada's 1 to 3 per cent target range.

Given the economic and financial backdrop, this interest rate reduction by the Bank will help to provide monetary conditions that would support continued economic expansion and keep the trend of inflation comfortably inside the target range next year.