The Bank of Canada left its key interest rate unchanged at 0.25% in a scheduled policy announcement on Wednesday and said it would begin purchasing provincial and corporate bonds to ease strains in those markets.
The central bank said in a press release that efforts to contain the new coronavirus pandemic, while necessary, have caused a sudden and deep contraction in economic activity and employment. It estimates the level of Canada’s gross domestic product could decline by roughly 15% to 30% in the second quarter compared with the fourth quarter of last year, for the sharpest domestic downturn on record.
The Bank of Canada has already cut its benchmark overnight interest rate three times since the beginning of March. It also launched a large-scale asset purchasing program, also known as quantitative easing, to inject more liquidity into rocky financial markets.
The pandemic is having a profound impact on the Canadian economy. Statistics Canada said earlier Wednesday that gross domestic product likely plunged by a record 9% in March from the previous month as nonessential businesses were closed in an effort to slow the spread of the new coronavirus. Output in the first quarter of 2020 fell by an estimated 2.6% on a nonannualized basis, the data agency said.
The Bank of Canada said it didn’t provide an estimate for annual GDP in 2020 because of the high level of uncertainty associated with the pandemic.