BoC kept overnight rate unchanged at effective lower bound of 0.25% as widely expected. Bank rate and deposit rate are kept at 0.50% and 0.25% respectively. It doesn’t expect to raise interest rate until into 2023. The QE program will also continues with current pace of CAD 4B per week. Pace of purchases will be adjusted required.
The economy is “proving to be more resilient than anticipated” in the second wave of pandemic. Q1 GDP is now “expected to be positive, rather than the contraction forecast in January”. Despite the “stronger near term outlook”, there is still “considerable economic slack and a great deal of uncertainty” both the virus and the economy. Labor market is “a long way from recovery”. CPI would move “temporarily” to top of the 1-3% band in the next few months. But it’s expected to “moderate as base-year effects dissipates”.
