The Bank of Canada announced that it is prepared to increase the cash it pumps into the financial system in response to another stock market plunge.
Specifically, Canada’s central bank responded to the widespread market selloff on Thursday with a $7-billion promise to the country's banking system and an expansion of its bond buy-back program, making moves it hasn't used since the financial crisis of 2008.
The Bank of Canada’s announcement followed the U.S. Federal Reserve, which said that it will pump $1.5 trillion U.S. into American financial markets as North American stock markets plummeted.
Canada's central bank said in a release that its own measures are aimed at supporting "the continuous functioning of financial markets," and foreshadowed that more tools could be used, if needed.
Last week, the Bank of Canada cut its trend-setting interest rate by half a percentage point (50 basis points) to help homeowners renewing mortgages and those with flexible rates. At the time, central bank Governor Stephen Poloz left the door open to lowering the key rate target even further from its current level of 1.25%, the lowest it has been since early 2018.
Additionally, a $1-billion aid package announced by the Government of Canada Thursday includes measures to ease access to federal benefits for workers who must be isolated or reduce hours to avoid layoffs at affected companies. It also promises an increase in lending through Crown corporations to help companies access credit, and flexible payment schedules with the Canada Revenue Agency.
