Bank of Canada made further rate cut to 0.75 percent; U.S. Federal Reserve slashes rate to near 0 in urgency to offset COVID-19 impact

As the coronavirus pandemic continues to deepen the threat to the economic growth of the world, U.S. and Canada took the dramatic step of slashing interest rates and unveil programs and aid packages to counteract the impact of the coronavirus outbreak.

The U.S. Federal Reserve took emergency action on Sunday and cut its benchmark interest rate by a full percentage point to a range of 0 to 0.25 percent, and said it would purchase more Treasury securities by at least $500 billion US and $200 billion US of mortgage-backed securities to encourage lending to try to offset the impact of the outbreak.

In a similar move, the Bank of Canada announced suddenly on Friday last week that it would further cut interest rates by half a percentage point to 0.75 percent and said it ‘stands ready’ to move again if needed.

This new rate cut on Friday is a step further to its recent emergency rate cut to 1.25 percent on March 4.

“This unscheduled rate decision is a proactive measure taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices,” the bank said.

According to Bloomberg, Finance Minister Bill Morneau announced in a press conference Friday afternoon that he would deliver a fiscal stimulus package next week that will include an additional $10 billion in new funding to the country’s two business financing agencies – the Business Development Bank of Canada and Export Development Canada.

The rates cut marks the first emergency rate cut by the country’s central bank since the global financial crisis a dozen years ago and is part of a coordinated government-wide response to threats that drive the nation’s economy into a recession. 

These drastic moves reflected the forthcoming threat facing the global economy as the coronavirus shutters factories, businesses and stores, closing borders, quarantines workers and disrupts everyday life.

The coronavirus is wreaking havoc across the world, governments around the world have stepped up restrictions on the movement of their citizens to reduce the spread of the COVID-19 pandemic.  

The virus has killed nearly 5,800 people with over 153,000 infected globally, according to the World Health Organization (WHO).

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