The Bank of Canada cut its key interest target by half a percentage point to 0.25 per cent in an unscheduled rate announcement Friday.
The central bank said its decision to lower rates is aimed at cushioning the economic shocks from COVID-19 and a sharp drop in oil prices by easing the cost of borrowing.
It added that providing credit in the economy for businesses that need it should help lay the foundation for the economy’s return to normalcy.
The interest rate cut takes the key rate to what the central bank referred to as “its effective lower bound” or the lowest level that rates can be set.
The unexpected decision marks the second time this month the bank has made an unscheduled cut to its trend-setting interest rate and the third cut overall from the start of March when the rate was at 1.75 per cent.
Bank governor Stephen Poloz said the goal of the decision Friday is to restore market functioning and help create a bridge for businesses and consumers over the economic shutdown linked to curbing the spread of COVID-19.
He also downplayed the idea of sending interest rates into negative territory, saying they’re not sensible at this stage.
The central bank also launched two new programs.
One will aim to alleviate strains in short-term funding markets, while the other will see the central bank begin acquiring federal government securities in the secondary market with a minimum of $5 billion per week.
“Low interest rates help to cushion the shock by easing the cost of borrowing,” Poloz said. “The intent of our decision today is two-fold: to immediately support the financial system so it keeps on providing credit, and, over the longer term, to lay the foundation for the economy’s return to normalcy.”
Poloz said it was too soon to say whether Canada was in a recession.
Latest numbers show 39 people across Canada have died as a result of the highly contagious COVID-19 virus, 15 of them in Ontario, which has seen the most fatalities. Quebec, with eight deaths, has reported the most cases in Canada at 1,629 — around double that in Ontario and B.C., which has seen 14 deaths.
Only Nunavut has not confirmed any infections to date.
The flu-like COVID-19 poses a particular risk to older people and those with underlying conditions but can strike anyone. Governments and experts have urged people — in some cases backed up by the threat of fines or jail time — to keep their distance from one another. Travellers entering Canada are required to quarantine for 14 days.
The COVID crisis has been keeping police busy, sometimes in unusual ways. For example, police in Hamilton charged a teenaged McDonald’s employee with fraud, mischief and uttering a forged document for allegedly faking a doctor’s note that she had the virus. The outlet was forced to shut down for several days while it was sanitized.
In New Brunswick, police charged a man with assault for allegedly coughing in someone’s face. Kennebecasis regional police say they had responded to a call about people failing to isolate themselves after returning from abroad as is mandatory. The man was arrested for allegedly uttering threats and “purposely coughing in someone’s face while feeling ill.”
With much of the country’s normal life affected by business closures and directives to stay at home, governments have scrambled to cushion the economic fallout. The Liberal government in Ottawa has already pledged $107 billion in direct assistance and tax relief for those among the unprecedented newly jobless, with more help expected.
The Canadian Press