OTTAWA—The Bank of Canada is cutting its key interest rate by a quarter of a percentage point to 0.5 per cent and slashing its outlook for economic growth this year.
The move comes as the central bank predicts the economy pulled back in the second quarter at an annual pace of 0.5 per cent.
A contraction in the second quarter would mean the country slipped into a recession in the first half of the year after shrinking in the first three months of the year, but the central bank did not make that distinction.
The Bank of Canada says the cut in the overnight rate target follows a drop in investment plans in the energy sector as well as weaker-than-expected exports.
The bank is now forecasting the economy will grow by 1.1 per cent this year, down from its April forecast for growth of 1.9 per cent.