Bank of Canada cuts key interest rate to 0.25%

Dated: March 27 2020

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Bank of Canada cuts key interest rate to 0.25%

Canada's central bank has also launched a quantitative easing program to bring liquidity to Canadian markets

The Bank of Canada cut its key interest rate by 50 basis points on Friday March 27. This is the third 50-basis-point cut this month as the bank does what it can to ease the cost of borrowing during the ongoing COVID-19 pandemic.

The unscheduled rate decision brings the bank’s policy interest rate down to 0.25 per cent. At 0.75 per cent, it was the highest such rate among the central banks of G7 countries.

 
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On Friday, Canada’s central bank also announced two new programs to bring greater liquidity to Canadian markets: the Commercial Paper Purchase Program (CPPP), and a quantitative easing program.

Under the latter, the bank will purchase a minimum of $5 billion in Government of Canada securities per week, starting April 1. The program will continue until Canada’s economic recovery is “well underway.”

Over the next 12 months, the CPPP will see the bank undertake primary and secondary market purchases of commercial paper issued by Canadian firms, municipalities and provincial agencies that have an outstanding commercial paper program. Poloz said the program will “help to restore a key source of short-term funding for businesses.”

Bank of canada rate cuts
Bank of Canada rate decisions over the last five quarters | Bank of Canada website

“The intent of our decision today is two-fold: to immediately support the financial system so it keeps on providing credit, and, over the longer term, to lay the foundation for the economy’s return to normalcy,” Bank of Canada governor Stephen Poloz said in an opening statement to media.

Nearly two weeks ago, the U.S. Federal Reserve slashed its overnight rate by one percentage point to a range between zero per cent and 0.25 per cent.

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Steven Axford

Steve Axford grew up in Victoria, BC and has always been active in his community. Steve is a Victoria Cougars Hockey Team alumni as well as a Victoria Shamrocks (intermediate) alumni. During his time....

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