In the second surprise of the morning, Bank of Canada (BoC) announced that the interest rates will be cut from 1% to 0.75%. That 25 basis points may not seem like much, but it goes to show that all is not well with the Canadian economy. The slump in the oil and energy sector has seen numerous job cuts announced with more to come. One report has suggested that the Canadian tar sands might see upto $60B in capex cuts over the coming weeks and months. Not just the oil sector, retail stores have been announcing bankruptcy and/or simply just pulling out of the Canadian market.
A move to cut rates from the BoC was expected, but not until later this year. There have been plenty of indications – both from the bond market and the forex market to suggest that the Canadian interest rates would be cut. Some banks were expecting that announcement to come later in the year. Following is the statement from BoC.