Canada's central bank cut its benchmark interest rate on Tuesday more aggressively than most economists had expected, bringing it to its lowest level in 50 years and declaring for the first time that the Canadian economy is in recession.

The Bank of Canada, in a statement released before the stock market opened, said it was cutting its overnight target rate by three-quarters of a percentage point to 1.5 percent, the lowest it's been since 1958.

In explaining its decision, the central bank said the world economic outlook has worsened in recent months. It now expects a "broader and deeper" global downturn than previously anticipated and sees the weakness taking a toll on Canada.

"While Canada's economy evolved largely as expected during the summer and early autumn, it is now entering a recession as a result of the weakness in global economic activity," the bank said in a statement.

It was the first clear admission by the bank that Canada is joining most major economies in sliding into recession, typically defined as two consecutive quarters of contraction, although Governor Mark Carney had hinted at it last month.

After the announcement, the Canadian dollar extended its decline against the U.S. dollar, while Toronto's S&P/TSX composite stock index was up slightly by midmorning.

Despite its stark message on recession, the bank's statement was less explicit than before on the need for more reductions in its overnight lending target in January or beyond.

It simply said it would monitor developments "in judging to what extent further monetary stimulus will be required".

Even so, most analysts expect additional easing of lending conditions.

"I think the commentary is realistic," said Craig Alexander, deputy chief economist at Toronto-Dominion Bank. "I expect that we will see another rate cut on January 20 and I suspect it will be a half a point this time."

The bank said it sees core inflation, the measure of prices used to guide monetary policy, falling further than it had forecast in October.

"As pressures on the downside build, there's probably the willingness to move further on rates, given that they're revising their inflation outlook," said Paul Ferley, assistant chief economist at the Royal Bank of Canada.

The last time Canada's central bank cut its overnight lending target rate by three-quarters of a point was in October 2001 following the September 11, 2001, attacks in the United States. It has now lowered rates by 3 full percentage points since December 2007.

Eleven of Canada's 12 primary securities dealers had forecast the bank would cut rates by a half point and only one had forecast a cut of three-quarters of a point. For January, dealers were evenly divided between forecasting a half-point cut and a quarter-point cut.

The lowest rate on record was in 1958 at 1.12 percent. At that time, the key rate was determined by Treasury yields rather than being set by policy-makers at the bank.

The global downturn has driven down commodity prices, resulting in lower incomes in Canada and plunging consumer confidence, the bank said. Job losses in November were the biggest in 26 years.

But Canada has a couple of factors working in its favor, it said. A depreciation of the Canadian dollar will offset some of the impact of the global recession and ongoing and significant liquidity provision has led to improvements in money markets and overall credit conditions.

The surprise move on Tuesday comes as the timing of fiscal action to help the economy is uncertain because of political maneuvering in Ottawa.

Prime Minister Stephen Harper has suspended Parliament until January 26 to avoid having his minority Conservative government toppled by the opposition. He has suggested that a budget to be unveiled on January 27 will include additional spending, and a deal to provide emergency aid to automakers could come before that.

Even so, the three opposition parties have said they may seek to bring down the government shortly after the budget is introduced and impose their own economic recovery plan.