Canada cuts interest rates

The Bank of Canada has cut its key interest rate for the first time in 18 months.

The cut is aimed at buoying the weak Canadian economy following the outbreak of the Sars virus and mad cow disease.

The central bank cut its target for the overnight rate by 25 basis points to 3%, saying "unanticipated events" had hurt economic growth.

It also lowered its bank rate by the same amount to 3.25%.

The bank said Sars and a case of mad cow disease that prompted trading partners to ban Canadian beef had hurt the economy.

Until now, Canada had been the only major industrialised nation to lift rates over recent years.

It lifted its base rate five times from a low of 2% in April 2002.

But Sars dealt a severe blow to tourism in Canada, particularly Toronto, and a total of 40 people in the country have died from the virus.

A United States ban on Canadian beef imports have also cost the economy millions of dollars.

"Today's interest rate reduction will provide support for domestic demand growth, and consequently for levels of aggregate demand consistent with keeping inflation on track to meet the 2% target over the medium term," said the bank.