BANK OF CANADA FOLLOWS U.S. CENTRAL BANK LEAD, CUTS KEY RATE

Mar 04, 2020

By Bob Komsic

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As expected, Canada’s central bank cuts its key interest rate by half-a-percent to 1.25% in response to the economic shock caused by the COVID-19 outbreak.
The Bank of Canada says its overnight rate target is being shaved because the virus is ”a material negative shock” to the country’s economic outlook.
Prior to the outbreak the central bank says the economy had been running ”close to potential with inflation on target.  However, COVID-19 represents a significant health threat to people in a growing number of countries.  In consequence, business activity in some regions has fallen sharply and supply chains have been disrupted,” said the bank in a statement.
In January, Bank of Canada Governor Stephen Poloz opened the door to a possible rate cut if economic weakness persisted.
The rate cut is the first since the summer of 2015 and brings the rate to a level it has not been at since early 2018.
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