BoC leaves its benchmark interest rates at 0.25%; recalibrates 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:

• Bank is recalibrating QE program to shift purchases towards longer-term bonds, which have more direct influence on the borrowing rates that are most important for households and businesses; total purchases will be gradually reduced to at least $4 billion week from $5 billion week
• Governing Council judges that, with these combined adjustments, QE program is providing at least as much monetary stimulus as before
• QE program will continue until the recovery is well underway
• Rising COVID-19 infections are likely to weigh on the economic outlook in many countries, and growth will continue to rely heavily on policy support
• U.S. GDP growth appears to be slowing considerably, while China’s economic recovery continues to broaden and recovery in Europe is slowing amid mounting lockdowns
• Canada’s economy is now transitioning to more moderate recuperation phase
• Canada’s economy is expected to grow by almost 4 percent on average in 2021 and 2022
• Despite continued low oil prices, the Canadian dollar has appreciated since July, largely reflecting a broad-based depreciation of the US dollar
• Governing Council will hold policy interest rate at effective lower bound until economic slack is absorbed so that 2-percent inflation target is sustainably achieved; in BoC’s current projection, this does not happen until into 2023
• We are committed to providing monetary policy stimulus needed to support recovery and achieve inflation objective