Finance Minister Jim Flaherty says he isn't dimming economic predictions he made earlier this year, despite warnings from the Bank of Canada that the recession will be longer and deeper than previously expected.

"I'm comfortable with our projections. The Bank of Canada has changed theirs, but my projections are the projections we put in the budget," Flaherty said on Tuesday.

"I'm staying with our budget projection. We're on track."

The comments came only hours after the Bank of Canada cut its key overnight interest rate by a quarter point to 0.25 per cent and warned that the recession will be "deeper than anticipated."

The new lending rate is the lowest-ever in Canadian history and could remain so for up to a year as the central bank attempts to spur lending and reverse economic shrinkage across the country.

It's also the lowest possible -- any further reduction would disrupt short-term money markets.

While Flaherty noted the central bank and its governor Mark Carney had been "overly optimistic" in earlier recovery predictions, the minister shrugged off opposition suggestions that an additional stimulus package is needed.

"The minister is making a mistake," said NDP finance critic Thomas Mulcair.

"More is needed to help the Canadian economy now ... We've simply bled out far too many jobs."

Meanwhile, Prime Minister Stephen Harper didn't rule out additional stimulus efforts in the coming months.

"I think it's important to note that our economic action plan did provide a significantly larger stimulus package than the International Monetary Fund was asking for, and one that we think is fairly robust in handling changing economic circumstances," Harper told reporters during a Jamaican visit.

"But obviously we will continue to examine the situation, and particularly the employment situation, and we will make adjustments where necessary."

Record low

The new rate will stay in place until mid-2010 as long as inflation remains low, the bank said in a statement.

Eric Lascelles, chief economics and rates strategist for TD Securities, said the central bank has now exhausted its ability to stimulate the economy through its key lending rate.

"Here we are, a record low, we can't go any lower." he told CTV Newsnet Tuesday. "It looks like the Bank of Canada, on this front, is done."

However, Lascelles added that the central bank still has a few arrows in its quiver to stimulate the economy.

"They're not completely out of ammunition," he said, pointing to the likely announcement later this week of "quantitative easing" policies.

Essentially, he said the practice entails the central bank "printing money" in order to buy up financial products like corporate bonds, which will in turn lower the cost for corporations to raise money.

Still, Lascelles said that bankers around the world are scaling back their predictions of economic recovery and warning that the recession will last longer than many had previously hoped.

"When you do that math, no matter how optimistic you are, you are talking about a time frame of years before things like the unemployment rate (are) back down to historically normal levels," he said.

Lascelles predicted that a full recovery may not arrive until the latter half of 2011.

"It's a long time coming, I'm afraid."

With files from The Canadian Press