TORONTO, March 27 — The Bank of Canada slashed its key overnight interest rate by 50 basis points today, delivering its second straight emergency cut this month, to support the financial system and the country’s economy amid the coronavirus pandemic.
The central bank unexpectedly cut its overnight interest rate to 0.25 per cent from 0.75 per cent, the lowest in more than a decade, after cutting rates by the same margin on March 13 and at its regular meeting on March 4. It said it stood ready to take further action as required in order to support the economy and keep inflation on target.
The central bank also launched a new program, the Commercial Paper Purchase Programme (CPPP), to help alleviate strains in short-term funding markets, and it said it would begin acquiring Government of Canada securities in the secondary market. It will begin with purchases of C$5 billion (RM15.4 billion) per week, across the yield curve.
“The spread of Covid-19 is having serious consequences for Canadians and for the economy, as is the abrupt decline in world oil prices,” the Bank said in a statement.
“The intent of our decision today is to support the financial system in its central role of providing credit in the economy, and to lay the foundation for the economy’s return to normalcy,” it added.
The Canadian dollar weakened to 1.4146 to the US dollar after the Bank’s rate cut.
“Better late than never,” Andrew Kelvin, senior rates strategist at TD Securities, said. “The rate cut was a foregone conclusion .. QE (quantitative easing) was sorely needed and we expect that we will see probably more QE announced within the next quarter. Probably adding CMBs (Canada Mortgage Bonds) to the mix,” Kelvin added. — Reuters
