The Bank of Canada surprised financial markets on 15 July by cutting its key interest rate by one quarter-point, citing the economic impact of the SARS outbreak and the recent discovery of an incident of mad cow disease in Alberta province.
Only a small minority of economists had expected the cut, which takes the bank's target for the overnight rate, the equivalent of the US fed funds rate, down to 3%.
"Inflation pressures have eased and more economic slack is opening up in Canada than was previously projected," the bank said.
Figures last week showed strong job creation in June, leading many analysts to believe that the bank would leave rates unchanged until later this year.
But the bank said foreign demand for Canadian products had been weaker than expected.
