The Bank of Canada has cut interest rates for the second time this month, slashing its benchmark rate by another 0.5 percentage points to 0.75 per cent in an emergency move to help the country’s economy grapple with a double hit from the coronavirus outbreak and plunging oil prices.
The move was part of a series of dramatic steps taken by Ottawa on Friday as a growing number of economists warn a recession for the country seems inevitable.
In a rare move, Bank of Canada governor Stephen Poloz was joined for the rate announcement by Bill Morneau, the finance minister, and Jeremy Rudin, the superintendent of financial institutions, Canada’s federal banking regulator.
“There are significant measures happening today and next week which I think people should see as a co-ordinated and very powerful package,” Mr Poloz said.
Mr Morneau made C$10bn ($7.2bn) of new credit immediately available to Canadian companies through the federal Business Development Bank and Export Development Canada.
The finance minister also said the Canadian government was preparing “a significant stimulus package” that will be unveiled next week.
That stimulus plan is expected to include support for Canada’s resource-heavy western provinces that have been slammed by the collapse in oil prices. Jason Kenney, the premier of Alberta, urged Ottawa to deploy a fiscal injection of C$20bn into the economy, a call echoed by several economists.
Meanwhile, on Friday federal lawmakers voted to suspend the Canadian parliament for five weeks until April 20 as a health and safety precaution. Before doing so they ratified the new USMCA trade agreement with the US and Mexico.
Justin Trudeau, the Canadian prime minister, is in self-isolation for two weeks after his wife Sophie Gregoire Trudeau tested positive for the novel coronavirus on Thursday.
Speaking at a press conference in front of his home on Friday Mr Trudeau, who has not shown any symptoms, said his wife’s symptoms were mild but they were “taking every precaution”.
Mr Trudeau urged Canadians to avoid all non-essential travel outside the country. At the same time Canada has moved to limit the number of airports accepting international flights and delayed the start of Canada’s cruise ship season from April to July. It has yet to decide whether it will restrict flights from companies hard hit by the virus.
The prime minister also promised further financial help in the coming days.
“I know that you’re concerned about uncertainty in the global economy. The steps being taken to keep you safe have an economic impact,” he said. “We do not want any Canadians to have to worry about whether or not they are going to be able to pay their rent, whether or not they’re going to be able to buy groceries, or care for their kids or elderly family members.”
Earlier on Wednesday Mr Trudeau announced an initial C$1bn package to help the health system and economy confront the outbreak. It included C$500m for the provinces and territories for healthcare and mitigation efforts, C$200m for federal medical supplies and changes to Canada’s employment insurance programme to waive the one-week waiting period for assistance for workers affected by the virus.
As of Friday morning Canada had 152 confirmed cases of the coronavirus, with the largest outbreaks occurring in the provinces of Ontario and British Columbia.
The Ontario government announced on Thursday that it was shutting all schools across the province for two weeks after the spring break holiday next week.