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Canada Cuts Key Rate as Oil Shock Clobbers Inflation Outlook

The Bank of Canada in Ottawa, Ontario.

The Bank of Canada in Ottawa, Ontario.

Photographer: Patrick Doyle/Bloomberg
Updated on

The Bank of Canada, reacting to the economic jolt of plummeting oil prices, delivered its own shock by becoming the first central bank in the Group of Seven to cut interest rates in response to the plunge.

The bank cut its rate on overnight loans between commercial banks by a quarter point to 0.75 percent, a decision none of the 22 economists in a Bloomberg News survey predicted. The rate, which influences car loans and other lending rates across the economy, had been at 1 percent since September 2010, and was last cut in April 2009.