The Bank of Canada has reinforced its commitment to keeping interest rates at historical lows until at least 2023 to help the economy recover from the Covid-19 pandemic.
In its latest policy statement, the central bank held its overnight interest rate at 0.25%, which they believe is the lowest it can go without disrupting the financial system, and said they will likely keep it there until 2023.
The Bank of Canada also pledged to continue buying government bonds to suppress longer-term borrowing costs and retain current levels of stimulus, even as they made technical adjustments to the pace of asset purchases.
The central bank basically reiterated its commitment to continue the measures that have helped Canada emerge more quickly than expected from the worst of the economic crisis, with Governor Tiff Macklem showing little inclination to pare back efforts.
"Our main message today is that it will take quite some time for the economy to fully recover from the COVID-19 pandemic," said Macklem in opening remarks at a press conference held in Ottawa. "The Bank of Canada will keep providing monetary stimulus to support the economy through the recovery."
Canada’s economy won’t fully absorb slack before 2023, keeping inflation below the 2% target over that time, the central bank said in its new quarterly forecasts released separately. It reiterated its commitment to keeping the overnight rate at near zero until the slack is absorbed and inflation is sustainably at target.
The Bank of Canada also pledged to scale back purchases of government bonds to a minimum $4 billion a week, down from $5 billion, and to shift purchases to longer-term securities, typically a more stimulative form of quantitative easing. It also recommitted to purchasing bonds until the recovery is "well underway."
