OTTAWA, (Reuters) – The Bank of Canada slashed its benchmark interest rate to 1.25% from 1.75% on Wednesday in the face of a fast-spreading coronavirus outbreak and said it was prepared to cut again if needed to support economic growth.
The central bank said the outbreak was “a material negative shock” to the Canadian and global outlooks and predicted that as the coronavirus spread, business and consumer confidence would deteriorate, further depressing economic activity.
“As the situation evolves, (the Bank’s) Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target,” the central bank said in a statement.
The move marked the first time in almost five years that bank had eased rates. The last time it cut by 50 basis points was in March 2009 during the global financial crisis.
The U.S. Federal Reserve cut rates by half a percentage point in an emergency move on Tuesday designed to shield the world’s largest economy from the impact of the coronavirus.
The Bank of Canada said that while markets continued to function well, it would continue to ensure the Canadian financial system had sufficient liquidity.
(Reporting by Kelsey Johnson; Editing by David Ljunggren)
