OTTAWA: Canadian Prime Minister Stephen Harper said the Bank of Canada’s surprise interest rate cut this week was appropriate, noting the deep decline in crude oil prices would pose significant headwinds for the economy.
The Canadian leader said he has confidence in the central bank which conducts policy independent of the government and its actions.
The Bank of Canada said the 50% plus decline in the price of crude oil was unambiguously negative for the Canadian economy.
The central bank stunned markets with 25 basis point cut to its benchmark policy rate, to 0.75%, saying the move was meant to act as an insurance policy against tumbling oil prices.
Mr. Harper said he remained upbeat on the Canadian economy, as the Bank of Canada has guided for 2% plus growth this year and in 2016, and reiterated his government’s long held pledge to record a balanced budget this year.
Economists have warned that a budget balance could prove difficult as plunging crude prices weigh on corporate and household incomes, and in turn tax revenue.
