OTTAWA (Reuters) – The Bank of Canada cut its key interest rate by a half-point on Tuesday to a record low of 0.5 percent, as expected, and signaled for the first time that it may resort to quantitative easing in the future.

"Given the low level of the target for the overnight rate, the bank is refining the approach it would take to provide additional monetary stimulus, if required, through credit and quantitative easing," it said in a statement.

But it said it would not outline the framework for any such action until it presents its April 23 Monetary Policy Report, two days after its next scheduled rate decision.

The bank acknowledged that its latest projections for the Canadian economy now look optimistic in the light of the latest economic data, showing a bigger-than-expected contraction in the fourth quarter of 3.4 percent. It said the data point to sharper decline in the economy and a larger output gap through the first half of 2009 than it had projected in January. Core inflation is also now expected to be lower than it had previously estimated.

The central bank's cumulative 400 basis-point cut in rates plus government action to boost credit and growth should begin to be felt in the second half of this year and build through 2010, the bank said. Canada's recovery from recession should be quicker than that of other major economies but remains reliant on a stabilization of the global financial system and a recovery of global growth.