The Bank of Canada announced today it is cutting its key interest rate by half a percentage point to 1.25% down from 1.75% in an effort to soften the economic impact stemming from the novel coronavirus outbreak.
The decision followed right after the U.S. central bank emergency rate cut by 50 basis points to a range of 1% to 1.25% on Tuesday, Mar.3 as an emergency economic measure against COVID-19 concerns. The bank said in a statement today that the Canadian economy won’t grow as much as previously forecasted for the first quarter of this year and that it took action because COVID-19 has disrupted supply chain reducing commodity prices and the Canadian dollar.
“Global markets are reacting to the spread of the virus by repricing risk across a broad set of assets, making financial conditions less accommodative,” the bank said. “It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity.
The statement also said the central bank may further adjust its key rate if the situation requires.
Some analysts worry about what the lower cost of borrowing might do to the real estate sector that is already hotter than it was when it peaked in early 2017 in some of Canada’s priciest cities.
The Toronto Regional Real Estate Board reported on Wednesday home sales in February were up 45.6 per cent compared with this time last year, when they hit a decade low. The average price of a home in Toronto climbed to $910,290, up from $779,791 in February last year, the board said. How many people can now afford to buy a house in Toronto?
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