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Bank Of Canada Reduces Key Interest Rate By Quarter Point

OTTAWA — An optimistic Bank of Canada shaved its trend-setting rate Tuesday in the hope that only a bit more stimulus is needed to get the economy back on its feet.

The central bank trimmed one-quarter of a percentage point, dropping the key rate to an even five per cent. The widely expected move affects short-term loan rates, including credit cards and consumer loans.

Canada’s big banks immediately followed suit, lowering their prime lending rates for their best customers by a quarter point to 6.50 per cent.

By going with a small rate cut, the Bank of Canada has shown its optimism that Canada’s gross domestic product could soon shake off the chill spilling over from the stagnant U.S. economy, analysts said.

But central bankers also warned that much of their optimism is based on hopes for a rebound in the United States, Canada’s biggest trading partner.

“It remains the bank’s view that, following the slowdown in the first half of this year, Canada’s economic growth will strengthen in the second half and in 2002,” the Bank of Canada said in a statement.

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