Bank of Canada matches Fed, cuts benchmark rate a half point to 1.25 per cent, citing COVID-19. “The outlook is clearly weaker now than it was in January,” the BoC said. 1/n #cdnecon $CAD
BoC says it “stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.” 2/n
BoC says “markets continue to function well … will continue to ensure that the Canadian financial system has sufficient liquidity.” 3/n
BoC describes COVID-19 as a “material negative shock to the Canadian and global outlooks,” disrupting earlier signs that the global economy was “stabilizing.” 4/n
BoC says that as COVID-19 spreads, it is “likely” that “business and consumer confidence will deteriorate, further depressing activity.” 5/n
BoC says “it is becoming clear” that Q1 will be weaker than expected, because of the drop in the terms of trade. BoC also notes that business investment “does not appear to be recovering as was expected following positive trade policy developments.” 6/n
Bottom line on the BoC: given the fast deteriorating global outlook, Canada’s central bank couldn’t risk a wider spread with U.S. rates, which could have put upward pressure on the dollar. More cuts this year are clearly a possibility. 7/7
