It's official: Canada is in recession

The Bank of Canada slashed its short-term interest rate Tuesday by three-quarters of a percentage point, the lowest it has been since 1958 as it struggles to stimulate a sputtering economy. At the same time the bank announced that for the first time that Canada has gone into a recession.

"While Canada's economy evolved largely as expected during the summer and early autumn, it is now entering a recession," the bank said. "The recent declines in terms of trade, real income growth, and confidence are prompting more cautious behaviour by households and businesses."

The new rate is 1.5 per cent. A year ago it was 4.5 per cent. But the country's chartered banks were not that generous. They trimmed their prime lending rate by only half a percentage point to 3.5 per cent.

Tuesday's dramatic cut to the overnight rate is the largest since October 2001 in the aftermath of the 9-11 terrorist attacks.

The bank said the rapidly deteriorating global economy and the impact of the financial crisis and plummeting commodity prices prompted its decision to go that low. And it suggested that more cuts could come.