Bank of Canada makes surprise rate cut

OTTAWA: The Bank of Canada (BOC) cut its overnight rate by 50 basis points to 0.75%, its second half-point cut in nine days, as the government pledged C$10 billion ($7.2 billion) in credit support for businesses to stave off a potential recession amid the coronavirus outbreak.

Canada ramped up its response to the fastspreading disease on Friday, advising citizens against non-essential foreign travel and promising “significant” financial aid for Canadians, which Finance Minister Bill Morneau said would be presented next week.

Bank of Canada Governor Stephen Poloz and Morneau held an unprecedented joint press conference to announce the policy changes.

“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,” the bank said in a statement.

“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 said.

Just eight days ago, Poloz said the resilience of the Canadian economy could be “seriously tested” by a coronavirus outbreak.

“We’re a little surprised by the timing,” Robert Both, Canadian macro strategist at TD Securities said. “We thought they would wait until next week to go with or right after the Fed. But it did become pretty clear over the course of this week that an inter-meeting cut was going to be required in short order.”