For the first time since the financial crisis of 2009, the Bank of Canada has delivered an emergency inter-meeting rate cut of 50 bps.

That brings the country’s key lending rate down to 0.75%, a level last seen in August 2017.

“It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy,” the BoC said in a statement. “In addition, lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy intensive regions.”

The Bank added that it is “closely monitoring economic and financial conditions, in coordination with other G7 central banks and fiscal authorities.”

“This move came slightly earlier than we expected, but is in line with our forecast for an eventual cut to 0.25% by mid-year,” wrote Josh Nye, senior economist with RBC Economics. “While monetary policy may not be the best tool for dealing with current economic challenges, there is little reason for the BoC to keep its powder dry at this point.”

All eyes are now on Canada’s Big 6 banks to see if they will pass along the full rate cut again in their prime rate reductions. If they do, the country’s prime rate will fall to 2.95% and immediately reduce interest rates for borrowers with floating rates and Home Equity Lines of Credit.

And the Bank of Canada likely isn’t done yet. Markets are still fully pricing in an additional 50 bps of easing at the Bank’s April 15 meeting, which would bring Canada’s overnight rate to 0.25%.

“As the situation continues to deteriorate, we expect the Bank to cut interest rates to 0.25%,” wrote Stephen Brown, senior economist with 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.”

Stress Test Changes Being Suspended 

Last month’s announced change to Canada’s insured mortgage stress test—which was to take effect April 6—has now been put on hold.

The federal government had planned to change the formula for the benchmark qualifying rate, which would have reduced the stress test from today’s rate of 5.19% to 4.89%.

A similar change for the uninsured mortgage stress test being considered by the Office of the Superintendent of Financial Institutions (OSFI) pending industry consultations has also been put on hold.

“In view of the current developments, OSFI is suspending all of its consultations and policy development on new or revised guidance until conditions stabilize. This includes the new proposed B-20 benchmark rate for uninsured mortgages,” OSFI announced. “As a result, the benchmark rate as currently published by the Bank of Canada will remain in force until further notice.”