Bank of Canada Holds the Line on Interest Rates

The Bank of Canada announced today it is keeping interest rates at the effective lower bound of 0.25% despite the improved GDP in Q4 2020. The tone of the announcement remained somewhat dovish: "While economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved." Overall inflation is currently close to 1%, with core inflation between 1.0 and 1.3%. The monetary policy support mentioned consists of maintaining interest rates where they are and continuing the bond repurchase (quantitative easing) program at the current level of at least $4 billion per week. The announcement referenced the Banks January projection that inflation wouldn't return to a sustainable 2% and economic slack would not be absorbed until into 2023. The full text of the Bank's announcement is available here.