Bank of Canada lowers overnight interest rate to .25%

The Bank of Canada has once again lowered its overnight interest rate. This cut is by half a percentage point to 0.25 per cent in an unscheduled rate announcement Friday. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent.

The Bank of Canada said in its statement that its decision to lower rates is aimed at soften the economic shocks from COVID-19 and a sharp drop in oil prices by easing the cost of borrowing.

The central bank also says this drops the interest overnight interest rate to effectively the lowest level that the interest rate can possibly be set. “This unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic.

“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,” says the Bank of Canada.

With so many Canadians no longer working, so many businesses now closed as the country is practicing social distancing and self-isolation, although the additional cut in the overnight rate of interest will help the economy during the COVID-19 pandemic it is hard to say how much.

by Terry Lankstead