Bank of Canada’s Overnight Rate Left 0.25%

December 9, 2020

Since a trio of 50-basis point reductions of the overnight central bank rate target last March to 0.25%, monetary policymakers have used other tools to promote growth, lift inflation, keep Canadian interest rates low across the whole yield curve. Forward guidance commits to continuing asset purchases at a pace of at least C$4 billion per week “until recover is well underway” and in-target inflation is sustainably restored. Another commitment is that the 0.25%  policy interest rate, which officials view an effective lower boundary, will not be raised until probably 2023 and only after economic slack has bee absorbed and the 2% inflation target restored. Today’s released statement projects “a choppy growth trajectory until a vaccine is widely available” and sub-target inflation for some time longer. Stronger economic momentum in October-November and a price pick-up in October “suggest a slightly firmer inflation track in 4Q” but the CPI outlook beyond that is essentially unchanged from that presented in the October Monetary Policy Report. The next Governing Council meeting is set for January 21 and will coincide with the quarterly released of updated projections.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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