The Bank of Canada has left interest rates unchanged and recommitted to its bond buying program.
In a statement Wednesday, Canada’s central bank held its benchmark overnight interest rate at 0.25% and reiterated a pledge to not raise borrowing costs before 2023. The Bank of Canada stressed that the job market remains a "long way from recovery."
The bank also recommitted to buying Canadian government bonds worth at least $4 billion a week, although it indicated it would curb such purchases once the recovery accelerates.
"While economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support," the bank said in its statement.
The Canadian dollar fell slightly after the statement and was trading down 0.2% at $1.266 per U.S. dollar in Toronto trading. Yields on five-year Canadian government bonds fell about two basis points after the decision to 0.937%.
A reduction in the central bank’s quantitative easing program is still possible for April, say economists, especially if data continues pointing to a stronger economic rebound.
New lockdowns in winter were less disruptive than feared, and Canada’s vaccine program is rolling out faster than expected just two months ago. A massive $1.9 trillion U.S. stimulus plan in the U.S. is also about to super-charge the economy of Canada’s largest trading partner.
The Bank of Canada has been raising its growth forecasts, with the latest estimates putting Canada’s economic expansion this year at 5.4% compared to a 4% projection by the central bank in January.
The Bank of Canada said Wednesday that the economy is "proving to be more resilient than anticipated" and that it now expects growth in the first quarter to be positive, versus a January forecast for a contraction to start the year.
The central bank also cited improving foreign demand and higher commodity prices that are brightening the outlook for Canada’s exports.
