By Samuel Indyk
Investing.com – The Bank of Canada has decided to keep its interest rate unchanged at 0.25% and says it will hold current level of policy rate until the inflation objective is sustainably achieved. The Central Bank said it will continue with its quantitative easing programme, with purchases of at least CAD 4bln per week.
“While economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support,” the Bank of Canada said in a statement accompanying the monetary policy decisions.
“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.”
Inflation & Growth
CPI in Canada currently sits near the bottom end of the Bank of Canada’s 1-3% target band but - as is expected across the globe - inflation is expected to move higher over the coming months amid higher commodity prices and due to base effects from the rapid price declines seen at the outset of the pandemic in 2020. The Bank of Canada expects prices to then moderate as base year effects dissipate and excess capacity exerts downward pressure on prices.
On growth, the Bank of Canada now sees GDP growing in the first quarter after forecasting a contraction in January.
“Consumers and businesses are adapting to containment measures, and housing market activity has been much stronger than expected,” the Bank of Canada said. “Consumers and businesses are adapting to containment measures, and housing market activity has been much stronger than expected.”