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

Just Posted

Stettler Auction Mart continues operations with heightened safety precautions

“We’ve had those online capabilities for awhile — all of our sales are online every week”

PHOTOS: Stettler Emergency Services personnel held an ‘appreciation parade’ on April 7th

The goal was to show their appreciation for all the amazing front line and essential workers in town

Alberta predicting 400 to 6,600 deaths from COVID-19 in months to come

Alberta predicting 400 to 6,600 deaths from COVID-19 in months to come

Alberta RCMP officers threatened with COVID-19 contamination

Currently, there is only one recorded incident that has led to charges in Wetaskiwin

A Message From the Publisher – ‘We will do our best, but without local advertising revenue, The Stettler Independent cannot survive’

‘We will do our best, but without local advertising revenue, The Stettler Independent cannot survive’

Armed Forces reports 20 military suicides last year, largest number since 2014

Armed Forces reports 20 military suicides last year, largest number since 2014

‘Little to do with COVID:’ Landowners, law experts criticize well cleanup bill

‘Little to do with COVID:’ Landowners, law experts criticize well cleanup bill

First troops return from Ukraine, in quarantine at Ontario military base

First troops return from Ukraine, in quarantine at Ontario military base

A message from Central Alberta Co-op

Please remember to practice social distancing at all our locations.

Man charged after licking product in store as part of ‘COVID Challenge:’ police

Man charged after licking product in store as part of ‘COVID Challenge:’ police

Business generally supports changes to wage subsidy rules unveiled by Trudeau

Business generally supports changes to wage subsidy rules unveiled by Trudeau

More COVID-19 aid, PPE needed for First Nations and Metis, leaders say

More COVID-19 aid, PPE needed for First Nations and Metis, leaders say

Calgary woman who died of COVID-19 was expecting 2020 to be best year: husband

Calgary woman who died of COVID-19 was expecting 2020 to be best year: husband

Most Read