The Bank of Canada cut interest rates Tuesday by one-quarter of a percentage point to 2.25 percent.
In a statement Tuesday, the central bank said three major interrelated developments are having a "profound impact" on the Canadian economy.
First, the intensification of the global financial crisis has led to severe strains in financial markets.
"The associated need for the global banking sector to continue to reduce leverage will restrain growth for some time," said the statement.
Second, the bank said the global economy appears to be heading into a mild recession, led by a U.S. economy already in recession.
Third, there have been sharp declines in many commodity prices.
"The outlook for growth and inflation in Canada is now more uncertain than usual," said the bank.
Earlier this month, the central bank slashed its key lending rate to 2.5 percent, one of many central banks making the move around the world.
Since then, Bank of Canada governor Mark Carney had been under pressure to chop interest rates again by as much as half a percentage point.
In a separate move later this week, Finance Minister Jim Flaherty is expected to announce that the federal government will guarantee new inter-bank borrowing.
The money is needed to finance operations and make credit available for mortgages and business loans.
Source: Xinhua
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