Archived IMT (2008.10.21)

The Bank of Canada cuts rates by 25 bps to 2.25%, less than the anticipated 50-bps, two weeks after reducing them by 50 bps as part of the global coordinated easing. Canadian overnight rates are now at a 4-year low. Prior to todays 25-bp cut, each of the BoCs last three rate cuts were in the magnitude of 50-bps. Despite the smaller than expected rate cut, the BoC allows ground for further easing to achieve the 2 per cent inflation target over the medium term. USDCAD bullishness seen maintained into the rest of the year, targetting 1.25 in the ling term. Reduced risk appetite will also help empower the pair as has been the case during rising risk aversion.