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

Community drums up support for Vernon hospital workers

Even health care workers and fellow first responders turned out to show love

UPDATE: 6.5-magnitude earthquake in Idaho shakes B.C. Interior

An earthquake was reportedly felt just before 5 p.m. throughout the Okanagan

COVID-19: Non-profit 3D printing face shields for local hospital

‘The response has been completely overwhelming’

WATCH: Vernon nurse shares fears for frontline workers

Craig Gallagher shares video explaining mental and physical stress health-care workers face

COVID-19: No tickets for parking downtown Vernon

Council considers free parking to encourage local shopping in ‘ghost town’ city centre hit by COVID-19

WATCH: Peachland boy gets a birthday parade

West Kelowna Party Parades made their way down to celebrate Josh Cardiff’s sixth birthday

World COVID-19 update: NATO suspicious of Russian military drills; Cruise ships ordered to stay at sea

Comprehensive update of coronavirus news from around the world for Wednesday, April 1

South Okanagan first responders salute hospital workers

“You’re awesome” and “Thank you” say Penticton first responders, passing by emergency entrance

John Horgan extends B.C.’s state of emergency for COVID-19

Premier urges everyone to follow Dr. Bonnie Henry’s advice

B.C.’s first community COVID-19 death was dentist ‘dedicated’ to health: lawyer

Vincent was 64 when he died on March 22 after attending the Pacific Dental Conference

Two inmates at prison housing Robert Pickton test positive for COVID-19

Correctional Service of Canada did not release any details on the identities of the inmates

‘April Fools’ social media prank leads to criminal investigation in Osoyoos

Post claims individuals will be canvassing door to door seeking housing for seasonal workers

Stay inside vehicles on Interior ferry crossings to prevent spread of COVID-19: B.C. government

Glade, Kootenay and Arrow Lakes some of the ferry crossings in Interior

Grocery pickups and other supports available for Shuswap seniors living at home

BC 211 is another way to connect with Shuswap Better at Home program

Most Read