In a bid to boost markets and consumer confidence, the Bank of Canada is cutting its key interest rate target by half a percentage point, dropping it to 1.25 per cent in response to the economic shock from the raging coronavirus outbreak.
The central bank said it cut its target for the overnight rate because COVID-19, as the virus is named, was “a material negative shock” to this country’s economic outlook.
Bank of Canada said it is becoming clear the Canadian economy won’t grow as much as previously forecasted for the first quarter of this year.
The rail line blockades, job action by Ontario teachers and harsh winter weather have also played a role in this decision.
The statement also said the central bank may further adjust its key rate if the situation calls for it.
“In light of all these developments, the outlook is clearly weaker now than it was in January,” the statement said.
“As the situation evolves, governing council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.”
Following an unexpected half point cut by the U.S. Federal Reserve on Tuesday, it was a matter of time before BoC followed suit.
That decision came after a call among central bankers and finance ministers from G7 countries, including Canada, about how to deal with the economic shocks the outbreak might have.
This rate cut could well be the first of many such rate cuts depending on how long the coronavirus crisis continues and its impact on the economy. -CINEWS