The half-point cut is the second since March 4, when the bank predicted U.S. conditions would likely require further response in Canada.

In its statement, the bank said it expected the Canadian economy will grow by 1.4 percent this year, 2.4 percent in 2009, and 3.3 percent in 2010 but conditions south of the border merited attention.

"The Bank is now projecting a deeper and more protracted slowdown in the U.S. economy," the statement said. "This has direct consequences for the Canadian economic outlook, with declining exports projected to exert a significant drag on growth in 2008."

The bank said inflation is judged to be about 2 percent, "consistent with an economy that was operating just above its production capacity."