OTTAWA—The Bank of Canada on Wednesday took a cue from the Federal Reserve and cut its benchmark interest rate by a half percentage point in response to mounting worries about the economic toll of the coronavirus epidemic.
It also signaled a willingness to ease further to guard against a deteriorating outlook.
The central bank said the spread of the coronavirus, which has infected more than 10,000 people outside China, represents a material negative shock to the Canadian and global economic outlooks. Its announcement came one day after the Fed’s emergency rate cut, also by a half percentage point.
“The outlook is clearly weaker now than it was in January,” the Bank of Canada said, referring to the last time it issued a policy decision. “As the situation evolves, Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.”
Wednesday’s half-percentage-point cut brings the central bank’s overnight rate to 1.25%, down from 1.75%.
Several market watchers said the central bank’s tone was more negative than anticipated, suggesting it could offer additional relief. “The bank left the door swinging wide open to further cuts, if need be,” BMO Capital Markets chief economist Doug Porter said.