What happened: The Bank of Canada cut its overnight interest rate by 50 basis points to 0.25% on Friday.
Why it matters: This is the third rate cut from the central bank this month and is intended to support Canadian financial markets during the COVID-19 pandemic.
The Bank of Canada cut its key interest rate by 50 basis points on Friday – the third 50-basis-point cut this month as the bank does what it can to ease the cost of borrowing during the ongoing COVID-19 pandemic.
The unscheduled rate decision brings the bank's policy interest rate down to 0.25%. At 0.75%, it was the highest such rate among the central banks of G7 countries.
On Friday, Canada's central bank also announced two new programs to bring greater liquidity to Canadian markets: the Commercial Paper Purchase Program (CPPP), and a quantitative easing program.
Under the latter, the bank will purchase a minimum of $5 billion in Government of Canada securities per week, starting April 1. The program will continue until Canada's economic recovery is "well underway."
Over the next 12 months, the CPPP will see the bank undertake primary and secondary market purchases of commercial paper issued by Canadian firms, municipalities and provincial agencies that have an outstanding commercial paper program. Poloz said the program will "help to restore a key source of short-term funding for businesses."
"The intent of our decision today is two-fold: to immediately support the financial system so it keeps on providing credit, and, over the longer term, to lay the foundation for the economy’s return to normalcy," Bank of Canada governor Stephen Poloz said in an opening statement to media.
Nearly two weeks ago, the U.S. Federal Reserve slashed its overnight rate by one percentage point to a range between 0% and 0.25%.
