Canada Follows the US in Interest Rate Cuts

[Asia Economy New York=Correspondent Baek Jong-min] The Bank of Canada (BOC) announced on the 4th (local time) that it would cut its benchmark interest rate by 0.5 percentage points. The Canadian benchmark interest rate was lowered from 1.75% to 1.25%.

Following the U.S. Federal Reserve's (Fed) unprecedented 0.5 percentage point rate cut after an emergency G7 finance ministers and central bank governors conference call the day before, Canada has joined the rate-cutting trend, making policy coordination at the Group of Seven (G7) level more visible.

This is the first rate cut by Canada since mid-2015, and the size of the cut is the largest since the financial crisis in 2009.

The Bank of Canada stated in a press release on its website that "the novel coronavirus disease (COVID-19) is having a materially negative impact on the economic outlook for Canada and the global economy, and monetary and fiscal authorities are responding."

The Bank of Canada also said it is "prepared to take further monetary policy actions if necessary to support economic growth and maintain the inflation target," leaving the possibility of additional rate cuts open.

However, while the relatively flexible U.S. and Canadian central banks have taken preemptive measures, the Bank of England, the European Central Bank (Germany, France, Italy), and Japan face difficulties in implementing monetary policy, so market assessments remain uncertain as to whether further G7 policy coordination will continue.