OTTAWA: Canada’s central bank lowered its key lending rate to 0.75 percent on Wednesday (Thursday in Manila) to bolster an economy facing a possible major slowdown over the recent plunge in oil prices.
“This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada,” the Bank of Canada said in a statement.
The quarter point cut from 1 percent marks the first change in Canadian interest rates in four years.
The bank also lowered its projections for Canadian economic growth, saying it will dramatically slow in the first half of this year before picking up.
Total growth for the year is forecast to be 2.1 percent—down 0.3 percentage points from a previous projection—and 2.4 percent in 2016.
The oil price shock is also expected to drag down inflation for a period, before it gradually rises back to the bank’s benchmark 2.0 percent, which is used in setting rates.
The central bank said oil’s sharp decline over the past six months is expected to boost global economic growth, especially in the United States.