Bank of Canada Interest Rate Announcement

The Bank of Canada lowered its overnight rate by 50 basis points this morning to 1.25 per cent.  This move is part of a coordinated action by global central banks to guard against the negative consequences of the Coronavirus outbreak.  In its statement, the Bank noted that although the Canadian economy is operating near potential and inflation is at its 2 per cent target, the Coronavirus is a material and negative shock to the Canadian and global outlook.

Economic growth in Canada slowed sharply to end 2019 and supply chain disruptions due to both Coronavirus and interrupted rail service are expected to slow growth further in the first quarter of this year.

Canadian bond yields have  declined significantly with 5-year bond yields falling below 1% for the first time since 2017.  Both variable and 5-year fixed qualifying mortgage rates will likely follow bond yields lower,  though elevated risk spreads may delay banks and other lenders in lowering mortgage rates in the immediate term.

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