The Bank of Canada made a surprise interest rate cut on Friday, trimming its key overnight lending rate by another half point.
With the cut – attributed to the worsening economic fallout from the coronavirus and plummeting oil prices - the Bank rate now stands at just 0.75%. It is the Bank’s second half-point reduction in two weeks, with the previous cut on March 4 also in reaction to the coronavirus. Back in the days of the 2008 financial crisis, the Bank’s rate got as low as 0.25%.
Typically, the Bank makes a rate announcement every six weeks, deviating from that policy only when circumstances dictate. The Bank’s latest move suggests it sees the coronavirus, which has sickened more than 100,000 and killed more than 4,000 across the globe, as a dire economic threat.
Meanwhile, the sharp fall in crude oil prices, triggered by a Saudi Arabia-Russia oil price war within the larger context of the coronavirus pandemic, has dealt another huge blow to a Canadian economy that is heavily dependent on its oil industry.
“It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy,” the Bank said. “In addition, lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy intensive regions.”
The Bank said it will provide a full update of its outlook for the Canadian and global economies on April 15 as part of its next regular schedule interest rate announcement. However, it also said it stands “ready to adjust monetary policy further if required to support economic growth and keep inflation on target.”
Source: Syngenta Canada