It is the first time since March 2009 that the central bank slash rates by 50bps, following US Fed’s decision to lower rates by the same margin. Policymakers said that the economy has been operating close to its potential with inflation on target, but noted that the coronavirus outbreak is a material negative shock to the economy.
The Committee added that the first quarter of the year will be weaker than expected, as business investment does not recover and amid rail line blockades, strikes by Ontario teachers, and winter storms in some regions.
Policymakers said that they will continue to monitor developments, in coordination with other G7 central banks and fiscal authorities, and will adjust monetary policy further if necessary. The Bank Rate and deposit rate were also cut by 50bps to 1.5% and 1%, respectively.