Canada’s central bank recently reduced its benchmark overnight rate by 0.5% to 0.5%, meeting market expectations and bringing the cumulative monetary policy easing to 400 basis points since December 2007.

The central bank said in a statement: “The nature of the US recession, with very weak auto and housing sectors, is particularly challenging for Canada. Stabilisation of the global financial system remains a precondition for the global and Canadian economic recoveries.”

In addition, Canada’s latest data shows that the Canadian economy contracted at an annual rate of -3.4% in Q4 2008. Following the rate decision, the Canadian dollar gave up some of its gains and was last up +0.2% against its US counterpart.