Fresh off a fifty basis-point cut by the Federal Reserve in the U.S. on March 4, 2020, the Bank of Canada lowered its key rate by the same amount from 1.75 per cent to 1.25 per cent. In a written statement the Bank of Canada said, “As the situation evolves, the Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.”
Canada is one of the last G7 nations to cut rates in the last 12 months due to global economic concerns. This is the first Bank of Canada rate cut since 2015. The Canadian dollar was down 0.11% to US$0.74609 at time of writing.
JP Gervais, chief economist with Farm Credit Canada says, “The Bank of Canada had no other options than to follow the lead of the U.S. Federal Reserve and cut its key rate by 50 basis-points. This is mostly to shore up consumer confidence at this stage because economic data are still consistent with the latest projections of the Bank.”
According to RealAg Radio host Shaun Haney, the Bank of Canada is hinting at further cuts if needed, based on all eyes being on the extent to which the current economic disablers of pipeline protests and coronavirus impact Canada in 2020. “But rate cuts don’t limit the spread of the virus, a virus which could impact export demand, which will stress test Canada’s economic resilience,” says Haney.
“There is no doubt that economic growth in 2020 will be weaker and so an additional rate cut in April cannot be ruled out,” Gervais says.