Canada’s dollar tumbled to a three- week low after the nation’s central bank unexpectedly cut its benchmark interest rate to a record low and said it may remain there for a year. The target rate for overnight loans between commercial banks was reduced to 0.25 percent, the lowest since the Bank of Canada was founded in 1934 and the lowest the bank said it can go. The bank also cut its forecast for economic growth. Bank Governor Mark Carney is scheduled to announce guidelines on April 23 about quantitative easing, in which a central bank buys government debt to revive economic growth. The currency, known as the loonie, weakened 0.9 percent to C$1.2499 per U.S. dollar at 9:28 a.m. in Toronto, from C$1.2391 yesterday. It touched C$1.2506, the lowest since April 2. One Canadian dollar buys 80.07 U.S. cents. “The cut clearly surprised people in the market who were looking for rates to stay the same,” said Carl Weinberg, chief economist at Valhalla, New York-based High Frequency Economics. “I’m looking forward to seeing guidelines on Thursday. It sounds like they’re going do something special, and to my mind that’s quantitative easing.” Thirteen of 25 economists surveyed by Bloomberg News forecast policy makers would leave the key overnight rate unchanged at 0.5 percent. Twelve predicted a quarter-percentage point reduction. The central bank last month cut the benchmark rate from 1 percent. Finance Minister Jim Flaherty said yesterday in Chicago that while he’s seeing “encouraging signs” in the economy, 2009 will be a “difficult year” and the country is “still in a serious recession.” Canadian wholesale sales unexpectedly fell in February, dropping 0.6 percent to C$41 billion ($33.1 billion), the fifth straight monthly decline, because of decreasing demand for the country’s exports, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg expected a 1 percent increase.

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