OTTAWA – Even though the coronavirus outbreak did not occur, the Bank of Canada will still cut interest rates to help offset falling oil prices, Governor Stephen Poloz said on Thursday.
The central bank cut interest rates overnight three times in March with a total of 150 basis points to only 0.25%, equaling record lows, as the effects of the closure related to coronavirus and crude oil prices began to bite.
Poloz told the House of Commons financial committee that low oil prices would automatically drive action.
“Just on the basis of falling commodity prices, I would say we will cut interest rates by at least 100 basis points,” he said when asked about the damage done by low oil prices, noting the bank also cut interest rates in 2015 when faced with similar surprises.
“Maybe we will finally do all 150 basis points if that is the only surprise we face.”
Poloz also said aggressive fiscal action by the government and the central bank’s monetary stimulus would create the best foundation for economic recovery after the coronavirus outbreak was contained.
Poloz reiterated that the Canadian central bank is ready to scale up its program if market conditions warrant it.
The Bank of Canada maintained a stable overnight benchmark of 0.25% on Wednesday and expanded its quantitative easing program in response to a coronavirus outbreak and low oil prices. (Reporting by Kelsey Johnson and David Ljunggren; Editing by Sandra Maler and Peter Cooney)
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