Bank of Canada keeps rates steady, sees worst downturn on record amid COVID-19

The Bank of Canada is keeping its trendsetting interest rate steady at 0.25 per cent, as widely expected by economists.

READ MORE: Canada’s GDP shrank by 9% in March amid COVID-19: StatCan

The decision came after the central bank slashed its key interest rate three times since the beginning of March, including two unscheduled cuts, to help counter the economic impact of the novel coronavirus pandemic.

The central bank said the downturn tied to COVID-19 will be the worst on record. Preliminary data from Statistics Canada today showed economic activity collapsed in March as it dropped a record nine per cent.

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The pandemic has forced companies to close and workers to stay at home as much as possible in a massive public health effort to slow the spread of COVID-19, leading to steep and sudden drops in business activity and consumer spending.

READ MORE: Home sales down 14% in March compared to February

The central bank’s economic outlook also released this morning says the speed of the anticipated rebound rests on the shoulders of containment efforts to bring the pandemic under control. If conditions improve quickly, the economic shock is likely to be “abrupt and deep but relatively short-lived” and followed by a strong rebound for most, but not all, sectors of the economy.

A more severe scenario would likely see a “significant number” of businesses closing for good and longer spells of unemployment as workers look for new jobs.

With files from Global News reporter Erica Alini