The Bank of Canada is cutting its key interest rate target by half of a percentage point, dropping it to 1.25 per cent in response to the economic shock from the novel coronavirus outbreak.
The central bank says its target for the overnight rate is being trimmed because COVID-19, as the virus is named, “is a material negative shock” to the country's 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 today, the Bank of Canada says it's becoming clear the Canadian economy won't grow as much as previously forecasted for the first quarter of this year.
The bank points to disrupted supply chains and rattled business and consumer confidence, rail line blockades, job action by Ontario teachers and harsh winter weather.
The statement also says the central bank may further adjust its key rate if the situation calls for it.