Bank of Canada unexpectedly slashed its key interest rate by 25 basis points on Wednesday, citing the steeper than expected contraction in the first half which weigh on inflation.
The central bank slashed its overnight rate to 0.50 percent, compared to both prior and predicted rate of 0.75 percent.
The BOC did not describe the current drop in growth as recession, but by definition a negative growth for two straight quarters is called “recession.”
The Canadian economy contracted an annual rate of 0.5 percent in the second quarter and 0.6 percent in the previous three months.
The economy was affected by the drop in oil prices, which is set for its third monthly decline in July, after hitting a peak of $62.71 a barrel in May, while non-oil exports failed to give an uplift to the economy.
As of 14:30 GMT, the Canadian dollar plummeted against the U.S. dollar to hit a high of 1.2927, compared with the session’s low opening at 1.2724.