Jan. 26, 2015 – The looming economic threat of sliding oil prices forced the Bank of Canada to unexpectedly cut its trend-setting rate to 0.75 per cent from one per cent — a surprising move that revealed how the country’s economic outlook soured in just a matter of months.
The central bank’s announcement follows the stunning nose dive in crude prices since the summer, adding that the price collapse poses many unknowns around economic growth in the oil-exporting nation.
It is the first time the bank has moved its overnight rate in either direction in nearly four and a half years.
Most economists had been predicting the bank to stand pat on the interest rate and hike it late 2015 or early 2016.
The central bank predicts the impact of falling oil prices to overshadow encouraging signs of economic life spotted outside the weakening energy sector, such as rising foreign demand, a boost in exports and job growth.
The decline in oil prices is also expected to shave billions of dollars from the bottom lines of federal and provincial governments.
Earlier this month, the federal government took the rare step of delaying the budget until at least April, so it could assess the effect of tumbling crude.
The Bank of Canada is scheduled to make its next interest-rate announcement March 4, while its next monetary policy report is due April 15.
— With files from Andy Blatchford, The Canadian Press