BoC cut overnight rate target by -50bps to 1.25% and warned that “, the COVID-19 virus is a material negative shock to the Canadian and global outlooks, and monetary and fiscal authorities are responding.” The central bank “stands ready to adjust monetary policy further if required”.
The central bank added, globally, the coronavirus is a “significant health threat” to people “in a growing number of countries”. Business activity in some regions has “fallen sharply” and supply chains have been “disrupted”. As the coronavirus spreads, ‘business and consumer confidence will deteriorate, further depressing activity.”
For Canada, Q1 will be “weaker than the Bank had expected”. The drop in terms of trade will weigh on income growth. Business investment “does not appear to be recovering”. Rail line blockades, strikes by Ontario teachers and winter storms are also dampening activity.
