BoC left overnight rate target unchanged at 0.25% as widely expected. It noted that this is the “effective lower bound” of the overnight rate already. BoC will continue to purchase at least CAD 5B in government securities per week in the secondary market. It’s also temporarily increasing the amount of treasury bills acquired at auctions to up to 40%.
Additionally, BoC launches today a new Provincial Bond Purchase Program of up to CAD 50B, to supplement the Provincial Money Market Purchase Program. Further there is a new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment grade corporate bonds in the secondary market. Both programs will be put in place in the coming weeks. Term repo facility is enhanced to permit funding for up to 24 months.
While it’s “too uncertain” to provide a complete economic forecasts, BoC analyzed alternative scenarios. GDP was down 1-3% in Q1 and will be 15-30% lower in Q2 this year, comparing with Q4 2019. CPI inflation is expected to be close to 0% in Q2, primarily due to lower gasoline prices.
