BoC leaves its benchmark interest rates at 0.25%; continues its QE program

The Bank of Canada (BoC) maintained its benchmark interest rates unchanged at 0.25 percent on Wednesday, as widely expected.

In its policy statement, the Canadian central bank noted:

• Governing Council will hold the policy interest rate at effective lower bound until economic slack is absorbed so that 2-percent inflation target is sustainably achieved;
• BoC is maintaining its extraordinary forward guidance, reinforced and supplemented by its QE program, which continues at its current pace of at least CAD4 billion per week;
• Recent news on development of effective vaccines is providing reassurance that pandemic will end and more normal activities will resume, although the pace and breadth of the global rollout of vaccinations remain uncertain;
• Stronger demand is pushing up prices for most commodities, including oil;
• Broad-based decline in the US exchange rate has contributed to further appreciation of CAD;
• Canada’s national accounts data for Q3 were consistent with the Bank’s expectations of sharp economic rebound;
• Labour market continues to recoup the jobs that were lost at start of the pandemic, albeit at slower pace; Activity remains highly uneven across different sectors and groups of workers;
• Economic momentum heading into Q4 appears to be stronger than was expected in October;
• Recent re-imposition of COVID-19 restrictions can be expected to weigh on growth in Q1 of 2021 and contribute to choppy trajectory until vaccine is widely available;
• Recently announced measures by federal government should help maintain business and household incomes during this second wave of the pandemic and support recovery;
• Outlook for inflation remains in line with the October MPR projection; considerable economic slack is expected to continue to weigh on core inflation for some time;
• Canada’s economic recovery will continue to require extraordinary monetary policy support;
• Bank will continue its QE program until the recovery is well underway and will adjust it as required to help bring inflation back to target on sustainable basis.