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Bank of Canada expects GDP to fall up to 30 per cent as it holds benchmark rate

·2 min read
Bank of Canada Governor Stephen Poloz (R) and Finance Minister Bill Morneau (L) speaksduring a news conference on Parliament Hill March 18, 2020 in Ottawa, Ontario. - Canadian Prime Minister Justin Trudeau announced Can$27 billion in direct aid on March 18, 2020 to help workers and businesses cope with the economic impacts of the coronavirus pandemic.He said tax payments worth an estimated Can$55 billion could be deferred until August. (Photo by Dave Chan / AFP) (Photo by DAVE CHAN/AFP via Getty Images)
(Getty Images)

The Bank of Canada is holding its key overnight interest rate at 0.25 per cent, after cutting 3 times to help soften the economic blow of the coronavirus pandemic.

Canada’s central bank says it’s too early for a complete forecast. “However, Bank analysis of alternative scenarios suggests the level of real activity was down 1-3 percent in the first quarter of 2020, and will be 15-30 percent lower in the second quarter than in fourth-quarter 2019,” said the Bank of Canada in a release.

In addition to previously announced measures to shore up financial stability, the Bank of Canada announced a new provincial Bond Buying Program of up to $50 billion. It also announced a new $10 billion Corporate Bond Purchase Program. Treasury Bill buying will increase to up 40 per cent.

“Unable to lift growth during a public health lockdown, the Bank of Canada is justifiably reaching deeper into its tool kit to keep the economy’s pieces in place so that they can be reassembled when the worst of the viral hit has past,” said Avery Shenfeld, chief economist at CIBC, in a note.

The Bank of Canada says the economy was in a solid position ahead of the COVID-19 outbreak, but widespread shutdowns and lower oil prices changed everything.

“In the face of these adverse economic and financial shocks, which are unprecedented in scale, the uncertainty surrounding the outlook is exceptionally high,” said the Bank of Canada

“While the global and Canadian economies are expected to rebound once the medical emergency ends, the timing and strength of the recovery will depend heavily on how the pandemic unfolds and what measures are required to contain it.”

This was Stephen Poloz’s second-to-last scheduled rate decision as Governor of the central bank.

During a news conference he said the shock is a global but “commodity producing countries like Canada are being hit twice.”

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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