Bank of Canada slashes key interest rate due to COVID-19

VANCOUVER (NEWS 1130) – The COVID-19 outbreak is starting to affect more parts of our lives, with the Bank of Canada now deciding to slash its key interest rate a half a percentage point.

The central bank is following in the footsteps of the U.S. Federal Reserve, which slashed its interest rates by half a percentage point.

The Bank of Canada has cut its benchmark interest rate by 50 basis points, one-half percent to 1.25 per cent, matching Tuesday's move by the US Federal Reserve. pic.twitter.com/4DQMdu8XAE

— Richard Dettman (@rwdettman) March 4, 2020

Bank of Canada Governor Stephen Poloz hinted at the possibility of doing so in January, saying a possible cut could come if weakness in the economy was more persistent than expected.

However, his comments came before the virus spread to dozens of countries after it was first discovered in China at the end of 2019.

The cuts are in an attempt to dampen the economic damage being cause by the outbreak.

Much of that damage has been seen in the tourism sector, but many other industries are also feeling the pinch. COVID-19 has disrupted global supply chains and shaved forecasts for economic growth both in Canada and abroad.

Markets had already baked in at least one rate cut this year, but now forecasts peg Tuesday’s impending decision as the first of what could be multiple reductions to the central bank’s key interest rate target, which currently stands at 1.75 per cent.

It’s still unclear what impact COVID-19 has had on the B.C. economy, with the province’s finance minister telling reporters on Tuesday it was still too early to quantify the effects the deadly disease has had.

However, Minister Carole James said she expects some kind of impact.

“We’ll be discussing this issue with colleagues across the country, I expect as well,” James said. “There is no question that it will have an impact on British Columbia. We’re a small, open economy and anything that buffets from the outside is going to have an impact on British Columbia.”

She noted there are contingencies in the budget, release last month, that could help dead with issues like this virus that impact the economy.

More new cases were confirmed in B.C. on Tuesday, bringing the provincial total to 12 as more than 92,000 people have been made sick worldwide.

Meanwhile, B.C.’s provincial health officer has said she’s stopped shaking hands in an effort to stymie the spread of COVID-19, which has left thousands of people dead, but none in Canada so far.

In Washington state, nine people have died as a result of the virus.

Roman Catholic priests in Vancouver have also been advised to direct parishioners not to shake hands and opt for nodding or bowing instead. At least one hockey rink in the Lower Mainland has told players to switch out post-game handshakes for fist bumps.

-With files from Lasia Kretzel and Hana Mae Nassar