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

‘Overwhelming, incredible’ support for foreign workers following West Kelowna COVID-19 outbreak

‘…Our team seems to be recovering well — symptoms are resolving’

RCMP call on kids to name latest foal recruits

The baby horses names are to start with the letter ‘S’

North Okanagan bands together in support against COVID-19

New group launches website with tools to help endure crisis

VIDEO: KLO middle school teachers shoot video to show support for students at home

KLO teachers Kayla Rose and Tonia Macgregor were the minds behind the gesture

COVID-19: Kelowna MLA to host virtual town hall on physical, mental health

Norm Letnick will be hosting the town hall with doctors from the Canadian Mental Health Association

WATCH: Salmon Arm artist hosts virtual art show amid COVID-19

Roxi Hermsen’s show “Into the Cosmos” is a tribute to her father Bill Sim

HERGOTT: COVID-19 and ICBC

Paul Hergott is a personal injury lawyer based in West Kelowna

COVID-19: Armstrong gym fined $345 after failure to close

The fitness centre was issued a ticket a day after province ordered all gyms to close

Bus rider who travelled to Golden tests positive for COVID-19

The passenger travelled from Calgary to Golden on March 15

Armed robbery of legal grow-op in Sicamous ends in arrest near Enderby

Residents alarmed over increased police presence Tuesday morning

Wildfire burns out-of-control on Adams Lake band land in the Shuswap

BC Wildfire Service reports Shuswap two-hectare fire is not threatening structures

COVID-19: Vernon homeless shelters combine in curling club

Gateway and Our Place shelter sites housed under one roof amid pandemic

COVID-19: Don’t get away for Easter weekend, Dr. Bonnie Henry warns

John Horgan, Adrian Dix call 130 faith leaders as holidays approach

COVID-19: Trudeau says 30K ventilators on the way; 3.6M Canadians claim benefits

Canada has seen more than 17,000 cases and at least 345 deaths due to COVID-19

Most Read