Bank of Canada Rate Still Holding at 0.25%

The Bank of Canada today confirmed it is holding the overnight rate at the effective lower bound of 0.25%. In its release, the Bank indicated it would continue to maintain this rate until its target inflation rate of 2.0% is "sustainably achieved"; they estimate this will not happen "until into 2023". At the same time, the Bank will be gradually reducing purchases under its quantitative easing (QE) program to $4 billion per week (down from $5 billion when the program was initiated); between maintaining the rate at 0.25% and reducing QE purchases, the Bank estimates it will be providing at least as much monetary stimulus as before.

The Bank is projecting a 5.5% decline in Canada's GDP for 2020, followed by two years in which growth will average 4%. They note that "Growth will likely be choppy as domestic demand is influenced by the evolution of the virus and its impact on consumer and business confidence."