Canada's finance ministry has 'necessary tools' to counter fallout from virus

FILE PHOTO: Canada's Minister of Finance Bill Morneau arrives to speak to the news media in Ottawa, Ontario, Canada February 18, 2020. REUTERS/Patrick Doyle

OTTAWA (Reuters) - Canada’s finance ministry is in contact with international partners and the Bank of Canada over the economic impact of the coronavirus and it has the fiscal firepower to counter fallout if the situation drags on, an official said on Friday.

Finance Minister Bill Morneau “is in regular discussions with the Governor of the Bank of Canada on this matter and we are discussing the situation with our international partners,” the minister’s spokeswoman, Maeva Proteau, said.

“Our government’s strong fiscal position means we continue to have all the necessary tools to respond in cases of continued fluctuations in the domestic and global markets,” she added.

The Bank of Canada will meet next week to decide on whether to keep its key overnight rate at 1.75%. Chances of a Bank of Canada interest rate cut next week have climbed to about 65% from less than 20% one week ago, data from the overnight index swaps market showed. [BOCWATCH]

By the end of next month, Prime Minister Justin Trudeau’s government is expected to deliver its budget for the next fiscal year.

Canada’s economic growth slowed to an annualized rate of 0.3% in the fourth quarter, the worst performance in almost four years, due in part to strikes, bad weather and shutdowns, Statistics Canada said.

The finance ministry said it was “too early to say exactly what the economic impacts will be” from the coronavirus, adding: “Canada’s financial sector, including the stock market, remains strong and resilient.”

The coronavirus panic sent world stock markets and the price of oil tumbling. U.S. crude oil futures CLc1 settled nearly 5% lower at $44.76 a barrel.

Canadian government bond yields fell across a steeper yield curve in sympathy with U.S. Treasuries. The two-year yield declined 9.6 basis points to 1.152%, its lowest since July 2017.

Reporting by Steve Scherer, additional reporting by David Ljunggren; Editing by Sandra Maler and Tom Brown