In response to the growing economic impact of the COVID-19 outbreak, the Bank of Canada decided to lower the overnight rate for a third time this month.
The BoC slashed its target for the overnight rate by 50 basis points to 0.25%. Correspondingly, the bank rate was reduced to 0.5% and the deposit rate to 0.25%.
The central bank said this brings the policy rate to its "effective lower bound." This decision, the BoC said, is to support individuals and businesses and to minimize any permanent damage to the structure of the economy.
"The spread of COVID-19 is having serious consequences for Canadians and for the economy, as is the abrupt decline in world oil prices. The pandemic-driven contraction has prompted decisive fiscal policy action in Canada to support individuals and businesses and to minimize any permanent damage to the structure of the economy," the bank said in a statement.
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The BoC intends the rate cut to cushion the impact of the economic shocks by easing the cost of borrowing and helping keep credit available to individuals and businesses.
"The intent of our decision today is to support the financial system in its central role of providing credit in the economy, and to lay the foundation for the economy's return to normalcy," the bank said.
The BoC also announced two programs to supplement the rate cut.
The first is the Commercial Paper Purchase Program, which is aimed to ease the strains in short-term funding markets.
The central bank also decided to acquire securities in the secondary market. This second program will allow the BoC to address the strains in the debt market.
"The bank is closely monitoring economic and financial conditions, in coordination with other G7 central banks and fiscal authorities, and will update its outlook in mid-April. As the situation evolves, Governing Council stands ready to take further action as required to support the Canadian economy and financial system and to keep inflation on target," the BoC said.