MNI POLICY: BOC Makes Surprise 50bp Cut to 0.75% on Virus, Oil

By Greg Quinn

     OTTAWA (MNI) - The Bank of Canada made an unscheduled 50bps interest-rate

cut Friday, following its first cut by the same amount on March 4, and said it's

prepared to act again if needed.

     The move to 0.75% responds to signs Canada's economy faces further damage

even since the last move, Governor Stephen Poloz said at a press conference

hosted with Finance Minister Bill Morneau and top banking regulator Jeremy

Rudin. Rudin also said there would be a reduction in a domestic risk buffer that

banks have to set aside, and Morneau also announced new economic supports. 

     Below is the text of the BOC decision:

     "The Bank of Canada today lowered its target for the overnight rate by 50

basis points to 0.75 percent. The Bank Rate is correspondingly 1 percent and the

deposit rate is 0.5 percent. This unscheduled rate decision is a proactive

measure taken in light of the negative shocks to Canada's economy arising from

the COVID-19 pandemic and the recent sharp drop in oil prices.

     It is clear that the spread of the coronavirus is having serious

consequences for Canadian families, and for Canada's economy. In addition, lower

prices for oil, even since our last scheduled rate decision on March 4, will

weigh heavily on the economy, particularly in energy intensive regions.

     The Bank will provide a full update of its outlook for the Canadian and

global economies on April 15. 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 Bank has also taken steps to ensure that the Canadian financial system

has sufficient liquidity. These additional measures have been announced in

separate notices on the Bank's website. The Bank is closely monitoring economic

and financial conditions, in coordination with other G7 central banks and fiscal

authorities."

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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