BoC maintains its benchmark interest rates at 0.25%; announces wind-down of some market operations

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

In its policy statement, the Canadian central bank noted:

• Incoming data confirm the severe impact of the COVID-19 pandemic on the global economy;
• This impact appears to have peaked, although uncertainty about how the recovery will unfold remains high;
• Global recovery likely will be protracted and uneven since different countries’ containment measures will be lifted at different times;
• In Canada, the pandemic has led to historic losses in output and job;
• Canadian economy, however, appears to have avoided the most severe scenario presented in the Bank’s April Monetary Policy Report (MPR);
• The level of real GDP in the first quarter was 2.1 percent lower than in the fourth quarter of 2019;
• The level of real GDP in the second quarter will likely show a further decline of 10-20 percent;
• BoC expects the economy to resume growth in the third quarter;
• CPI inflation has decreased to near zero, as anticipated in the April MPR;
• BoC expects temporary factors to keep CPI inflation below target band in near term;
• BoC’s programs to improve market function are having their intended effect;
• As short-term funding conditions have improved, BoC is reducing the frequency of its term repo operations to once per week, and its program to purchase bankers’ acceptances to bi-weekly operations;
• BoC stands ready to adjust these programs if market conditions warrant;
• Other programs to purchase federal, provincial, and corporate debt are continuing at their present frequency and scope;
• As market function improves and containment restrictions ease, BoC’s focus will shift to supporting the resumption of growth in output and employment;
• BoC maintains its commitment to continue large-scale asset purchases until economic recovery is well underway;
• Any further policy actions would be calibrated to provide necessary degree of monetary policy accommodation required to achieve inflation target.