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Canada's central bank cuts interest rate and plans to print more money

Canada's central bank has reduced its trendsetting interest rate to next to nothing and plans to print money as it copes with a worse-than-expected recession.

To add some stability to credit and mortgage markets, the Bank of Canada said its new key rate — halved to just 0.25 percent — will be kept there for the next year.

That was bank governor Mark Carney's last traditional bid to revive credit markets and economic growth.

His new direction will be to add to the money supply to buy assets from banks and therefore increase the amount available for lending.

Carney now concedes the recession is more severe and will last longer than he had thought only a few months ago.

Economic growth is also being hindered with plant closings and restructuring in key industries, particularly autos and forestry, that impair Canada's ability to produce for years to come.

"There is light at the end of the tunnel," Carney said, noting that signs of bottoming out are appearing and a recovery is expected next year.

Massive government spending in Canada and abroad, and monetary action by central banks will eventually pull the global economy out of its tailspin, he said.

Gunman in Jamaica storms tourists' jet

Vacationing Canadians feared for their lives after their Cuba-bound CanJet Airlines plane was boarded by a ranting gunman in Jamaica.

Police said the gunman with "mental challenges" forced his way through security and stormed their airliner from Halifax at Montego Bay.

A flight attendant persuaded him to accept cash and belongings in exchange for the freedom of the 159 passengers and two crew members.

It wasn't until seven hours later that the remaining six crew members were freed when Jamaican police stormed the plane after entering the cockpit through a window.

Canadian Prime Minister Stephen Harper, who happened to be in Jamaica at the time, thanked Jamaican Prime Minister Bruce Golding for how the incident was handled and the gunman arrested.

"There was quite clearly a breach of security," Golding said, offering the Canadians luxury accommodations and repayment for any lost money or belongings.

News in brief

• Suggestions by Liberal leader Michael Ignatieff that tax increases are inevitable to eliminate massive budget deficits caused by the Conservative government's economic stimulus measures haven't gone over well. A poll found 30 percent of respondents nationally said they are less likely to vote Liberal in the next election as a result of the comments. In Atlantic Canada, the number jumped to 44 percent, while it was 40 percent for British Columbians.

• Bombardier has been chosen by the Toronto Transit Commission to supply 204 new streetcars at a cost of $1.2 billion (U.S.). Also in the running to replace Toronto's aging fleet of "Red Rockets" was Siemens of Germany with a higher bid. Bombardier has been making streetcars for decades in Thunder Bay, Ontario.

Facts and figures

Canadians helped the economy in February as retailers rang up sales of $28 billion (U.S.), up 0.2 percent from January and reversing steep declines in November and December.

Higher commodity prices pushed Canada's dollar higher to 82.75 U.S. cents on Friday, while the U.S. greenback returned $1.2985 Canadian, before bank exchange fees.

The Bank of Canada key interest rate dropped to 0.25 percent, while the prime lending rate is down to 2.25 percent.

Canadian stock markets continued a seven-week rally as Toronto's composite index was higher Friday at 9,506 points and the TSX Venture index was at 997 points.

Lotto 6-49: (Wednesday) 10, 12, 21, 38, 41 and 42; bonus 28. (April 18) 4, 5, 21, 33, 42 and 47; bonus 24. Super 7: (April 17) 5, 19, 21, 33, 35, 36 and 44; bonus 28.

Regional briefs

• Jane Sterk says it's time for change in British Columbia, where her Green Party is running a full slate of candidates in the May 12 provincial election. She accused the Liberal government of Premier Gordon Campbell of ignoring forestry workers, students and seniors, and of "giving away water rights to private companies." Campbell, in seeking his third term of office, said the Liberals have made the provincial economy one of the strongest on the continent.

• Thousands of Canadian Auto Workers rallied outside the Ontario Legislature to demand that their pensions be protected. It was in response to Premier Dalton McGuinty saying there wasn't enough money in the province's safety net to cover General Motors pensions if the company goes under. The province provides pensioners with up to $1,000 a month in the event a pension plan fails to provide its full benefit, or any at all.

• Quebecers are talking about the ethics of a romance involving Liberal Deputy Premier Nathalie Normandeau and Francois Bonnardel, a member of the Action democratique du Quebec. "Loving someone is not a matter of ethics — I am in a relationship with a colleague who is in a different political party," she said.

Jim Fox can be reached at canadareport@hotmail.com.

Canada's central bank cuts interest rate and plans to print more money 04/25/09 [Last modified: Saturday, April 25, 2009 6:57pm]
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