Nov. 12 (Bloomberg) -- Bank of Canada Senior Deputy Governor Paul Jenkins said policy makers will probably cut interest rates again amid ``major shocks'' including a global credit crisis, faltering economic growth and lower prices for commodity exports.

``Some further monetary stimulus will likely be required to achieve our 2 percent inflation target over the medium term,'' Jenkins said, according to slide-show notes of a speech he gave earlier today in Toronto that was closed to the media.

Canada cut its benchmark overnight lending rate to 2.25 percent on Oct. 21 and signaled more action may be needed. Governor Mark Carney signaled in a Nov. 9 interview the economy may enter a recession next year, and said he would act ``appropriately.'' Toronto-Dominion Bank today said Canadian policy makers will cut the key rate a half point to 1.75 percent at the next decision Dec. 9, the lowest since 1960.

The Canadian dollar extended its decline after Jenkins' remarks were published, falling as much as 2.6 percent to C$1.2383 versus the U.S. dollar, the lowest since Oct. 29. It traded at C$1.2349 at 4:23 p.m. in Toronto.

The world's eighth-largest economy is weighed down by sluggish automobile and lumber exports to the U.S., falling prices for exported commodities such as crude oil and tighter lending. Consumer confidence is at the lowest since 1982 even as companies added a record number of workers in September.

Canada's economic growth ``has slowed abruptly this year,'' and financial markets are ``under stress,'' Jenkins said.

Economic Growth

Gross domestic product will rise 0.6 percent this year and next, the central bank predicts. That would be the slowest since 1991-92, during Canada's last recession. The economy just missed a recession in the first half of this year, with output shrinking at a 0.8 percent pace in the first quarter and growing 0.3 percent in the second quarter.

The Bank of Canada and Finance Minister Jim Flaherty today expanded measures to help banks get through a global credit crisis, buying up more mortgages and other debt and offering cheaper loan insurance.

Flaherty pledged to triple the amount of mortgages the government can buy from banks to as much as C$75 billion. The Bank of Canada said it will inject an additional C$8 billion into the banking system to temporarily buy up ``non-mortgage loan portfolio'' assets.

State-owned Canada Mortgage and Housing Corp. today also bought C$7 billion of mortgages for five years at an average yield of 3.78 percent, in the third phase of the purchase program.

`Period of Stress'

Flaherty predicted ``an extended period of stress'' in credit markets, and repeated today that while local banks are the world's safest, he wants to be proactive in protecting them in case problems deepen. He also wants to keep them from falling behind foreign competitors who may get an advantage from government financing.

Canada and the rest of the Group of 20 industrialized and emerging economies promised last weekend to act ``urgently'' to stem a global financial crisis and recession.

U.S. Treasury Secretary Henry Paulson today said he plans to use the second half of the $700 billion financial rescue program to help relieve pressures on consumer credit, scrapping an effort to buy devalued mortgage assets.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.

Last Updated: November 12, 2008 16:35 EST