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Coronavirus: Canada central bank cuts rates first time since 2015

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Ottawa (AFP)

Canada's central bank on Wednesday cut its key lending rate by 50 basis points to 1.25 percent in response to the growing economic risk posed by the coronavirus epidemic.

The interest rate drop was the first in Canada since mid-2015, and followed a similar move by the US Federal Reserve on Tuesday.

"While Canada's economy has been operating close to potential with inflation on target, the COVID-19 virus is a material negative shock to the Canadian and global outlooks, and monetary and fiscal authorities are responding," the Bank of Canada said.

The central bank also signalled that it stands ready to further cut rates in the coming months, as needed, "to support economic growth and keep inflation on target."

In a statement, it said the global economy had been showing signs of stabilizing prior to the outbreak. But the novel coronavirus has now suddenly become "a significant health threat" to people in several countries.

Across the world, 3,217 people have died from the virus. More than 94,000 have been infected in 81 countries and territories, according to AFP's latest toll based on official sources.

As a consequence of containment efforts by health authorities, business activity in several regions of the world has fallen sharply and supply chains have been disrupted, dragging down commodity prices and the Canadian dollar.

The Bank of Canada said, after financial markets plummeted recently on coronavirus fears, business and consumer confidence are likely to deteriorate further as the virus spreads.

The bank's key lending rate had, until now, remained unchanged since October 2018, with inflation holding relatively stable at close to the bank's 2.0 percent target and unemployment at a near-record low.

The last 50 basis point cut was in 2009, after the bank rapidly lowered interest rates through 2008 in response to the global financial crisis.

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