BoC: Governing Council stands ready to adjust policy further and to deploy other market tools, if required, to support economic growth and keep inflation on target

The Bank of Canada (BoC) issued a statement on its March 13 decision to reduce interest rates by 50 basis points. 

In the statement, the Canadian central bank noted: "Although a revised staff projection was not yet available, it was evident to Governing Council that the disruptive impact of the coronavirus, along with the drop in oil prices, would in all likelihood justify some further easing of policy in the coming weeks. The economic consequences of the coronavirus itself will clearly have a major negative impact on the economy. Both the size and duration of this impact are unknown, but it was acknowledged that the effects should ultimately prove to be temporary. The impacts of the drop in oil prices are much more quantifiable and potentially more long-lasting. We recognized that maintaining the availability of credit to Canadian businesses and households is of the utmost importance in supporting the economy through a major temporary disruption of this nature. In this context, the discussion moved to the question of the appropriate timing of any further interest rate adjustments: waiting until our next fixed announcement date in mid-April, when we would also have a new staff projection; waiting for another move in global interest rates, thereby capitalizing on an international coordination effect, as we had done on March 4; or moving rates on Friday, thereby helping to create an even more powerful, domestically-coordinated policy package. After some discussion of the relative merits, Governing Council concluded that there could be considerable benefit to reducing interest rates immediately and significantly to complement the other measures supporting the functioning of credit markets."