The Bank of Canada in Ottawa on Tuesday, Dec. 15, 2020. The Bank of Canada will provide a window into its thinking on the economy as it makes an announcement about its trend-setting rate. THE CANADIAN PRESS/Sean Kilpatrick

The Bank of Canada in Ottawa on Tuesday, Dec. 15, 2020. The Bank of Canada will provide a window into its thinking on the economy as it makes an announcement about its trend-setting rate. THE CANADIAN PRESS/Sean Kilpatrick

Bank of Canada keeps key interest rate target on hold at 0.25 per cent

Bank points to new, more transmissible variants of COVID-19 as the biggest risk to an economic recovery

The Bank of Canada is keeping its key interest rate target on hold at 0.25 per cent, saying economic conditions still require it even if things are going better than anticipated.

In a statement, the central bank says it expects economic growth in the first quarter of 2021 to be positive, as opposed to its previous forecast in January for a contraction to start the year.

The bank’s senior decision-makers say resilience in the economy has to do with consumers and businesses adapting to new rounds of lockdowns and restrictions.

The statement also points to a stronger-than-expected housing market as a driver of an expected rise in real gross domestic product for the first three months of the year.

But the central bank warns of considerable uncertainty about the path of the pandemic that muddies longer-term economic outlooks, including how long it will take for the labour market to recover from historic losses last year.

The statement from the bank also points to new, more transmissible variants of COVID-19 as the biggest risk to an economic recovery, warning localized outbreaks could “restrain growth and add choppiness to the recovery.”

The bank says its key policy rate will stay at 0.25 per cent until the economy recovers and inflation is back at its two per cent comfort zone, which it doesn’t see happening until 2023.

The statement from the central bank also says it will continue its quantitative easing program, which is a way for central banks to pump money into the economy.

CIBC senior economist Royce Mendes writes that the communique from the bank fell short of pulling forward the timing of when the economy may heal enough to raise rates, which many experts now believe could occur late next year.

The key policy rate has been at 0.25 per cent for almost exactly one year after the central bank cut rates three times last March at the onset of the COVID-19 pandemic, bringing it to the lower effective bound, meaning the lowest it can go.

The Bank of Canada is scheduled to release its updated economic outlook late next month as part of its quarterly monetary policy report.

READ MORE: Canada to benefit from U.S. rebound, says OECD

The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Coronaviruseconomy

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Image/ Metro Creative Connection
County of Wetaskiwin responds to Alberta Energy Regulator’s decision on Directive 067.

On April 7, 2021 the Alberta Energy Regular (AER) announced a new edition of Directive 067.

A damaged unicorn statue is shown in a field outside of Delia, Alta. in this undated handout photo. It’s not often police can report that a unicorn has been found, but it was the truth Saturday when RCMP said a stolen, stainless-steel statue of the mythical beast had been located in a field not far from where he’d been taken. THE CANADIAN PRESS/HO, RCMP *MANDATORY CREDIT*
Mounties get their unicorn; stolen statue of mythical beast found in Alberta field

Police are still looking for suspects, and have called in their forensics experts to help

There were six additional deaths across Alberta reported over the past 24 hours, bringing the death toll to 1,926 since the beginning of the pandemic. (File photo)
file photo
Wetaskiwin RCMP respond to break and enter and theft at a Wetaskiwin church

RCMP responded to a break and enter and theft at Jesus Cares Fellowship Church.

Each spring, the Okanagan Fest-of-Ale is held in Penticton. This year, as a result of the COVID-19 pandemic, the festival will not be held. However, beer is still available. How much do you know about this beverage? (pxfuel.com)
QUIZ: How much do you really know about beer?

Put your knowledge to the test with this short quiz

Pall Bearers carrying the coffin of the Duke of Edinburgh, followed by the Prince of Wales, left and Princess Anne, right, into St George’s Chapel for his funeral, at Windsor Castle, in Windsor, England, Saturday April 17, 2021. (Danny Lawson/Pool via AP)
Trudeau announces $200K donation to Duke of Edinburgh award as Prince Philip laid to rest

A tribute to the late prince’s ‘remarkable life and his selfless service,’ the Prime Minister said Saturday

A vial of some of the first 500,000 AstraZeneca COVID-19 vaccine doses that Canada secured. THE CANADIAN PRESS/Carlos Osorio
Canada’s 2nd blood clot confirmed in Alberta after AstraZeneca vaccine

The male patient, who is in his 60s, is said to be recovering

The funeral of Britain’s Prince Philip in Windsor, England, on Saturday, April 17, 2021. Philip died April 9 at the age of 99. (Kirsty Wigglesworth/AP)
PHOTOS: Prince Philip laid to rest Saturday as sombre queen sits alone

The entire royal procession and funeral took place out of public view within the grounds of Windsor Castle

Prime Minister Justin Trudeau looks on as Deputy Prime Minister and Finance Minister Chrystia Freeland responds to a question during a news conference on Parliament Hill in Ottawa, Tuesday, Aug. 18, 2020. THE CANADIAN PRESS/Adrian Wyld
Expectations high as Trudeau Liberals get ready to unveil first pandemic budget

The Liberals will look to thread an economic needle with Monday’s budget

Doses of the Moderna COVID‑19 vaccine in a freezer trailer, to be transported to Canada during the COVID-19 pandemic. THE CANADIAN PRESS/Nathan Denette
Pfizer to increase vaccine deliveries in Canada as Moderna supply slashed

Moderna plans to ship 650,000 doses of its vaccine to Canada by the end of the month, instead of the expected 1.2 million

A empty classroom is pictured at Eric Hamber Secondary school in Vancouver, B.C. Monday, March 23, 2020. The Alberta government says schools in Calgary will move to at-home learning starting Monday for students in grades 7 to 12.THE CANADIAN PRESS/Jonathan Hayward
Calgary schools to shift to at-home learning for grades 7 to 12 due to COVID-19

The change, due to COVID-19, is to last for two weeks

Most Read