You can’t subject a virus to death by a thousand rate cuts, but central banks are going to make sure nobody can say they didn’t try.
Just nine days after delivering a 50bps rate cut, the Bank of Canada moved again on Friday, slashing the benchmark rate by another 50bps. It was the first emergency cut by the bank since the crisis.
So, for those who aren’t great with math, that is 100bps in less than two weeks from the BOC, and it comes on top of Thursday’s move to expand the scope of repo operations to ensure ample liquidity.
Thursday was a truly dark day for Canadian equities. The TSX’s 12% loss was the single largest one-day decline since May 1940. And no, that is not a typo. Thursday was the worst day for Canadian stocks in eighty years.
On Thursday evening, Prime Minister Trudeau said he’ll be in isolation for a couple of weeks after his wife Sophie tested positive for the coronavirus.
At a joint press conference with Stephen Poloz, Finance Minister Bill Morneau tipped a fiscal stimulus package which will apparently include another C$10 billion in funds earmarked for the Business Development Bank of Canada and Export Development Canada.
“It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy”, the BOC said, in a statement accompanying Friday’s surprise move. “In addition, lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy intensive regions”.
That’s obviously a key point. The BOC’s first March cut came before crude prices collapsed the most since 1991 following the dissolution of OPEC+ in Vienna and the subsequent acrimony between the Saudis and the Russians. The loonie is the weakest in four years.
“The Bank will provide a full update of its outlook for the Canadian and global economies on April 15”, the BOC went on to say, adding an obligatory nod to being prepared to do more, if necessary.
Meanwhile, the Canadian Parliament is now suspended until at least April 20 as part of the virus containment effort.