The Bank of Canada announced this morning that it is reducing its policy interest rate by 50 basis points from 1.75 per cent to 1.25 per cent. This is the first rate change since October 24, 2018 when the Bank increased the policy rate from 1.5 per cent to 1.75 per cent.

A lower policy rate tends to reduce other interest rates and make borrowing easier which, in turn, helps stimulate economic activity.

The move follows yesterday’s announcement of a 50 basis point rate cut by the U.S. Federal Reserve that was intended to help protect the economy from knock-on effects of the coronavirus outbreak.

The Bank of Canada sees “the COVID-19 virus as a material negative shock to the Canadian and global outlooks.” The Bank also cited the dampening effects of “rail line blockades, strikes by Ontario teachers, and winter storms.”

The Bank says that it “stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.” The next announcement on the policy interest rate is set for April 15, 2020.