BoC leaves its benchmark interest rates at 0.25%; adjusts pace of its QE purchases to CAD3 billion per week (from CAD4 billion per week)

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:

• Effective the week of April 26, weekly net purchases of Government of Canada bonds will be adjusted to target of CAD3 billion; this adjustment to amount of incremental stimulus being added each week reflects progress made in economic recovery;
• Outlook has improved for both global and Canadian economies;
• Canada’s Q1 growth appears considerably stronger than Bank’s January forecast, as households and companies adapted to the second wave and associated restrictions;
• BoC now forecasts real GDP growth of 6.5 percent in 2021 (versus +4.0 percent in January), moderating to around 3.75 percent in 2022 and 3.25 percent in 2023;
• Inflation is expected to rise temporarily to around the top of the 1-3 percent inflation-control range over the next few months; this is largely the result of base-year effects;
• CPI inflation is expected to ease back toward 2 percent over H2 of 2021 as these base-year effects diminish;
• Bank now projects global GDP to grow by just over 6.75 percent in 2021, about 4 percent in 2022, and almost 3.25 percent in 2023;
• Global recovery has lifted commodity prices, including oil, contributing to the strength of the Canadian dollar;
• We remain committed to holding policy interest rate at effective lower bound until economic slack is absorbed so that 2-percent inflation target is sustainably achieved; based on the Bank’s latest projection, this is now expected to happen some time in H2 of 2022;
• BoC is continuing its QE program to reinforce this commitment and keep interest rates low across the yield curve; decisions regarding further adjustments to the pace of net purchases will be guided by Governing Council’s ongoing assessment of strength and durability of the recovery;
• We will continue to provide the appropriate degree of monetary policy stimulus to support recovery and achieve inflation objective.