Bank of Canada aims to boost confidence with cash
Central bank plans to inject billions into markets to shore up stability
Canadian policy makers are stepping up efforts to bolster confidence in the nation’s economy, including the central bank sending cash into funding markets and suggestions from Justin Trudeau’s government that fiscal stimulus could soon follow.
The Bank of Canada said Thursday after the closing bell that it plans to inject billions of dollars into markets to shore up stability, just eight days after it slashed interest rates by half a percentage point.
Two hours later, Finance Minister Bill Morneau held an impromptu news conference to underscore the government’s urgency in dealing with the fallout from the coronavirus pandemic.
“What we’re going to do is to use our fiscal strength to make sure our economy stays strong in the face of this uncertainty,” Morneau said, without providing specifics.
The additional steps followed the biggest plunge in Canadian stocks prices in eight decades on Thursday as concern mounted that a global recession is at hand. Several of Canada’s largest banks are predicting a technical recession this year as the country takes a double hit from falling oil prices and virusrelated stoppages.
While the prime minister himself is in isolation after his wife tested positive for COVID-19, Trudeau’s government has so far taken a cautious approach. It has promised just $1.1 billion in additional funding to respond to the virus, but it’s hinting it may change tack.
On Thursday, Morneau confirmed the government has been forced to redo its revenue forecasts for the 2020 budget he plans to release on March 20. He also said he’s speaking with global counterparts, including Treasury Secretary Steven Mnuchin, and the government was busy all day discussing its response to the deteriorating conditions. The Bank of Canada cut its benchmark interest rate to 1.25 per cent on March 4. Since then, oil prices have plunged, adding another shock to an already faltering economy and raising the likelihood of more rate cuts. Swaps trading suggests investors are expecting another 75 basis points in cuts by mid April.