By Fergal Smith and Kelsey Johnson
TORONTO/OTTAWA (Reuters) – The Bank of Canada slashed its key overnight interest by 50 basis points for the third time this month on Friday in an effort to support the financial system and the country’s economy amid the coronavirus pandemic.
The central bank unexpectedly cut its overnight interest rate to 0.25% from 0.75%, the lowest in more than a decade, after taking the same step on March 13 and March 4 and said it stood ready to take further action as required in order to support the economy and keep inflation on target.
“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 Bank said in a statement.
“The intent of our decision today is to support the financial system in its central role of providing credit in the economy, and to lay the foundation for the economy’s return to normalcy,” it added.
The Canadian dollar weakened to 1.4146 to the U.S. dollar after the Bank’s rate cut.
The central bank also launched a new program, the Commercial Paper Purchase Program (CPPP), to help alleviate strains in short-term funding markets, and it said it would begin acquiring Government of Canada securities in the secondary market. It will begin with purchases of C$5 billion per week, across the yield curve.
(Reporting by Fergal Smith in Toronto and Kelsey Johnson in Ottawa; Editing by Steve Scherer, Chizu Nomiyama and David Gregorio)
