BoC kept monetary policy unchanged as widely expected. Overnight Rate is held at the effective lower bound of 0.25%. Bank Rate is kept at 0.25% correspondingly, deposit rate at 0.25%. BoC will also continue the QE program with large-scale asset purchases of at least CAD 5B per week of government bonds. BoC also pledge to “provide further monetary stimulus as needed.”
In the accompanying statement, BoC said global and Canadian outlook is “extremely uncertain, given the unpredictability of the course of the COVID-19 pandemic”. It expects global economy to contract by -5% in 2020, then grow by 5% on average in 2021 and 2022. But the timing and pace of recovery varies among regions.
Canadian economic activity in Q2 is estimated to be 15% lower than the level at the end of 2019. But there are “early signs” that reopening and pent-up demand are leading to an “initial bounce-back” in employment and out put. In BoC’s central scenario, roughly 40% of H1’s contraction is made up in Q3. Real GDP would still decline -7.8% in 2020, with 5.1% growth in 2021 and 3.7% in 2022.
