The Bank of Canada is cutting its key interest rate target by half a percentage point, dropping it to 1.25 per cent in response to the economic shock from the novel coronavirus outbreak.

The central bank said Wednesday that it cut its target for the overnight rate because COVID-19, as the virus is named, was B次元官网网址渁 material negative shockB次元官网网址� to this countryB次元官网网址檚 economic outlook.

In January, the central bank said the global economy was showing signs of stabilizing, but governor Stephen Poloz opened the door to a possible interest rate cut if weakness in the economy was more persistent than expected.

In a statement Wednesday, the Bank of Canada said it is becoming clear the Canadian economy wonB次元官网网址檛 grow as much as previously forecasted for the first quarter of this year.

The central bank pointed to disrupted supply chains and rattled business and consumer confidence as well as rail line blockades, job action by Ontario teachers and harsh winter weather.

The statement also said the central bank may further adjust its key rate if the situation calls for it.

B次元官网网址淚n light of all these developments, the outlook is clearly weaker now than it was in January,B次元官网网址� the statement said.

B次元官网网址淎s the situation evolves, governing council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.B次元官网网址�

The cut in the bankB次元官网网址檚 key rate is the first since the summer of 2015 and brings the rate to a level it hasnB次元官网网址檛 been at since early 2018.

Economists had widely forecasted the bank would cut its rate following an unexpected half point cut by the U.S. Federal Reserve on Tuesday to its rate as an emergency economic buttress against COVID-19 concerns.

That decision came after a call among central bankers and finance ministers from G7 countries, including Canada, about how to deal with the economic shocks the outbreak might have.

The Bank of Canada generally finalizes its decision on rates by late Tuesday, meaning the call for its decision came after the U.S. Federal Reserve made its move.

Financial markets had expected at least one rate cut this year, but forecasts have pegged the decision Wednesday as the first of what could be multiple reductions to the central bankB次元官网网址檚 key interest rate target.

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The Canadian Press

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