The Bank of Canada is keeping its key interest rate target on hold at 0.25 per cent, saying this morning that it is effectively as low as it can go to combat some of the economic impacts of the coronavirus.
#Breaking Bank of Canada keeps benchmark interest rate at 0.25%. Sees economy contracting 15% to 30% in Q2. Unveils provincial bond buying program worth $50 billion.
— mike eppel (@eppman) April 15, 2020
The pandemic has forced companies to close and workers to stay at home as much as possible in a massive public health effort to slow the spread of COVID-19, leading to steep and sudden drops in business activity and consumer spending.
The Bank of Canada says the downturn tied to COVID-19 will be the worst on record, and could potentially cause permanent damage to the Canadian economy if restrictions aren’t slowly lifted starting this summer.
The central bank’s economic outlook also released this morning says the speed of the anticipated rebound rests on the shoulders of containment efforts to bring the pandemic under control.
If conditions improve quickly, the economic shock is likely to be “abrupt and deep but relatively short-lived” and followed by a strong rebound for most, but not all, sectors of the economy.
A more severe scenario would likely see a “significant number” of businesses closing for good and longer spells of unemployment as workers look for new jobs.
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