The Bank of Canada (BOC) cut its target for the overnight rate by another 50 basis points to 0.75 percent and has now cut it by a full percentage point following the earlier cut on March 4, the first time it had cut the rate since raising it in October 2018.
BOC is the sixth central bank to cut its rate at unscheduled policy meetings since the U.S. Federal Reserve's surprise cut on March 3.
Canada's rate cut boosts the number of central banks that have cut rates this week to eight, with six banks cutting their rate by 50 basis points and the other two cutting by 100 points.
Since Jan. 29, when Sri Lanka's central bank was the first to refer to the threat from the virus to global growth when it cut its rate, 31 central banks have cut their rates, with BOC the only central bank to cut its rate twice.
"It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for the Canadian economy," BOC said, adding lower oil prices will weigh heavily on the economy, particularly in energy intensive regions.
BOC will update its outlook for the economy at its next scheduled policy meeting on April 15.
In January BOC forecast 1.6 percent growth for 2020, unchanged from 2019, and 2.0 percent growth for 2021.
In a separate statement, BOC also announced it was planning to launch a Banker's Acceptance Purchase Facility (BAPF) and starting March 23 it would conduct secondary market purchases of 1-month acceptances.
The bankers' acceptance market is one of Canada's core funding markets and a key source of funding for small- and medium-sized corporate borrowers.
BOC has also taken other steps to ensure liquidity in the financial system, including broadening the scope of its bond buyback program.
The first operation will be a C$500 million switch operation in the 30-year sector on March 16 and on March 17 BOC will temporarily add new term repo operations with terms of 6 and 12 months.
The operations will take place bi-weekly, with C$4 billion and C$3 billion offered that day for 168 day and 350 day maturities, respectively.
www.CentralBankNews.info
The Bank of Canada released two statements, first the monetary policy decision and then Governor Stephen Poloz' opening statement to a press conference:
"The Bank of Canada today lowered its target for the overnight rate by 50 basis points to ¾ percent, effective Monday, March 16, 2020. The Bank Rate is correspondingly 1 percent and the deposit rate is ½ percent. 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.
It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy. In addition, lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy intensive regions.
The Bank will provide a full update of its outlook for the Canadian and global economies on April 15. 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 has also taken steps to ensure that the Canadian financial system has sufficient liquidity. These additional measures have been announced in separate notices on the Bank’s website. The Bank is closely monitoring economic and financial conditions, in coordination with other G7 central banks and fiscal authorities."
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"Thank you, Minister. The Bank of Canada is contributing to this collective effort to support the Canadian economy and financial system, and to ensure credit channels remain open.
The Bank is cutting its target for the overnight rate by 50 basis points to ¾ of a percent. It is already clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy.
In addition, Lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy intensive regions.
Combined with the other measures announced today, lower interest rates will help to support confidence in businesses and households. For example, borrowing costs will be lowered both for new purchases and through variable rate mortgages and mortgage renewals.
Today, the Bank also announced a new Bankers’ Acceptance Purchase Facility. This will support a key funding market for small- and medium-size businesses at a time when they may have increased funding needs and credit conditions are tightening.
The Bank has also taken other steps to ensure that the Canadian financial system has sufficient liquidity. These additional measures have been announced in separate notices on the Bank’s website.
The Bank of Canada is taking concerted action to support the Canadian economy during this period of economic stress. The Bank’s Governing Council stands ready to do what is required to support economic growth and keep inflation on target, and we will continue to ensure that the Canadian financial system has sufficient liquidity."
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