OTTAWA — The governor of the Bank of Canada says the central bank would have likely slashed its key interest rate in response to plunging oil prices, if that alone had been the only shock to the domestic economy.
The cut might even have been to the current 0.25 per cent level it reached as the COVID-19 pandemic took hold, Stephen Poloz told a House of Commons committee Thursday.
Prices for oil on international markets have dropped by half since the start of the year.
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The drop has been even worse for Alberta’s oil, with its benchmark price of Western Canadian Select falling about 90 per cent since January.
4:33Coronavirus outbreak: Bank of Canada keeps rates steady as economy sees “significant contraction”
Coronavirus outbreak: Bank of Canada keeps rates steady as economy sees “significant contraction”
But it was the COVID-19 pandemic that drove the central bank over the course of March to reduce its target overnight rate from 1.75 per cent to 0.25 per cent, which Poloz said is effectively as low as it can go to combat the economic impacts of COVID-19.