The Bank of Canada is again trying to send help to the ailing economy amid COVID-19 fears. The BoC is cutting its overnight rate target by half a percentage point to 0.75%. This isn't the first time the central bank has cut interest rates in response to COVID-19. The moves comes a little more than a week after the BoC decided to follow the U.S. Federal Reserve's footsteps to cut interest rates by 0.5 percentage points to 1.25% down from 1.75%.
Despite the Bank of Canada’s attempts to mitigate economic fallout of COVID-19, RBC economists aren’t hopeful that lower interest rates will help bolster the economy against both falling oil prices and COVID-19. In a note to investors on Friday March 13, RBC not only forecasted that Canada would enter into a recession but said that government intervention would do little to help the economy.
“Even with aggressive intervention, it is increasingly likely that countries around the world will slip into recession this year,” said RBC in a note to investors. “This is particularly true in Canada where the combination of falling oil prices and virus related stoppages are likely to overwhelm any lift that lower interest rates and government spending provide.”
RBC economists aren’t the only ones concerned about the economic impacts of COVID-19. Last week the Business Council of British Columbia downgraded its growth outlook for the Canadian economy from a GDP growth to 1.1% down from 1.6%. The majority of the decline, 0.3 percentage points is as a result of COVID-19 and the remaining 0.2 percentage points is a result of rail blockades.
Closer to home in B.C., COVID-19 is also expected to reduce GDP growth by 0.1 percentage points with rail blockades reducing it another 0.5 percentage points.
