The Bank of Canada building is shown in Ottawa on Wednesday, April 24, 2019. (THE CANADIAN PRESS/Sean Kilpatrick)

Bank of Canada cuts key rate to 1.25% amid coronavirus concerns

Rail line blockades, job action by Ontario teachers and harsh winter weather were also to blame

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 novel coronavirus outbreak.

The central bank said Wednesday that 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.

In January, the central bank said the global economy was showing signs of stabilizing, but governor Stephen Poloz opened the door to a possible interest rate cut if weakness in the economy was more persistent than expected.

In a statement Wednesday, the 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 central bank pointed to disrupted supply chains and rattled business and consumer confidence as well as rail line blockades, job action by Ontario teachers and harsh winter weather.

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.”

The cut in the bank’s key rate is the first since the summer of 2015 and brings the rate to a level it hasn’t been at since early 2018.

Economists had widely forecasted the bank would cut its rate following an unexpected half point cut by the U.S. Federal Reserve on Tuesday to its rate as an emergency economic buttress against COVID-19 concerns.

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.

The Bank of Canada generally finalizes its decision on rates by late Tuesday, meaning the call for its decision came after the U.S. Federal Reserve made its move.

Financial markets had expected at least one rate cut this year, but forecasts have pegged the decision Wednesday as the first of what could be multiple reductions to the central bank’s key interest rate target.

READ MORE: B.C.’s three latest COVID-19 cases related to travel from Iran

READ MORE: Amid COVID-19 panic, B.C. psychologist urges shoppers to not clear out grocery stores

The Canadian Press


Like us on Facebook and follow us on Twitter.

Coronavirus

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Comments are closed

Just Posted

Search continues for person seen floating in Coquihalla River in Hope

Rescuers halted the search Thursday night as darkness fell

Rescuers halt Coquihalla River search due to darkness, after reports of person in river

No information to indicate a child is involved, RCMP state, after this information surfaced on social media

Arrest at Abbotsford shopping centre

Man detained Thursday afternoon

Two Chilliwack women make weekly Crime Stoppers most wanted list

Ashley Felix and Raina McDonald wanted on unrelated issues

United Way grant provides food to 100 former prisoners, families

Abbotsford-based M2/W2 Association receives $25,000 to supply groceries

13 new B.C. COVID-19 cases, Langley Lodge outbreak ends

Health care outbreaks down to four, 162 cases active

Greater Vancouver home sales start to tick up, with prices holding steady

Residential sales last month reached 2,443, a 64.5 per cent jump from May

Langley Lodge’s deadly outbreak declared over

Fraser Health and long-term care home administrator confirm Friday declaration

PHOTOS: South Surrey tractor project evokes ‘$1-million smile,’ helps connect neighbours

Retired Surrey firefighter Ron Henze began project for friend’s dad to fill time during pandemic

Alberta health minister orders review into response after noose found in hospital in 2016

A piece of rope tied into a noose was found taped to the door of an operating room at the Grande Prairie Hospital in 2016

B.C.’s major rivers surge, sparking flood warnings

A persistent low pressure system over Alberta has led to several days of heavy rain

B.C.’s Indigenous rights law faces 2020 implementation deadline

Pipeline projects carry on as B.C. works on UN goals

‘Mind boggling’: B.C. man $1 million richer after winning Lotto 6/49 a second time

David O’Brien hopes to use his winnings to travel and of course keep playing the lottery

Most Read