Bank of Canada Governor Stephen Poloz attends a luncheon for Women in Capital Markets (WCM) in Toronto, Ontario, Canada March 5, 2020. REUTERS/Chris Helgren

The Bank of Canada is making an emergency cut to its benchmark overnight interest rate in the face of growing coronavirus fears.

The 50 bps cut brings the rate down to 0.75 per cent.

“This unscheduled rate decision is a proactive measure taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices,” said the Bank of Canada in a statement.

“It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy.”

The Bank of Canada says it will provide an update on on April 15, but stands ready to adjust monetary policy as needed.

“As the situation continues to deteriorate, we expect the Bank to cut interest rates a to 0.25%,” said Stephen Brown, senior Canada economist at Capital Economics.

“But even with this policy support, the disruption from the coronavirus outbreak is likely to lead to a recession in Canada this year.”

Canada’s central bank cut its overnight rate by 50bps on March 4, but says conditions have since worsened.

The Office of the Superintendent of Financial Institutions (OSFI), Canada’s regulator of financial institutions, also announced an additional $300 billion in lending capacity.

Ottawa is also offering $10 billion in credit support for businesses through Business Development Bank of Canada and Export Development Canada.

In what Finance Minister Bill Morneau described as a likely first, he joined Bank of Canada Governor Stephen Poloz and OSFI superintendent Jeremy Rudin for the coordinated policy announcement outlining stimulus plans during the COVID-19 outbreak.

Morneau says a full economic stimulus package is coming next week and would not commit to a budget date.

When asked about the possibility of negative interest rates, Poloz says he’s among central bankers that “don’t like the idea that much.” He says it’s an option but it’s unlikely it will be needed.

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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