The Bank of Canada building is seen in Ottawa, Wednesday, April 15, 2020. The Bank of Canada is expected to keep its key interest rate unchanged this morning on the first day of governor Tiff Macklem’s tenure. THE CANADIAN PRESS/Adrian Wyld

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

Central bank now expects GDP to decline between 10 and 20 per cent compared with the fourth quarter of 2019

The Bank of Canada kept its key interest rate target on hold as it said it believes the economy has avoided its worst-case scenario due to the pandemic.

The central bank said Wednesday its target for the overnight rate will remain at 0.25 per cent.

It said the impact of the pandemic on the global economy appears to have peaked, although uncertainty about how the recovery will unfold remains high.

The bank said it believes Canada has avoided the most severe economic scenario painted that it painted in April, updating its GDP figures for the second quarter of the year.

The central bank now expects GDP to decline between 10 and 20 per cent compared with the fourth quarter of 2019, down from the 15 to 30 per cent decline forecasted in April.

In a statement announcing the rate decision, the central bank said it still expects the economy to resume growth in the third quarter.

“Decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown on disposable income and helping to lay the foundation for economic recovery,” the statement said.

People wearing protective face masks walk past artwork of women wearing masks, on the side of a building in Vancouver, on Sunday, May 31, 2020. THE CANADIAN PRESS/Darryl Dyck

The announcement comes on the first day of Tiff Macklem’s tenure as governor, taking over from Stephen Poloz whose seven-year term ended Tuesday.

Macklem participated as an observer during deliberations by the bank’s governing council over the past few days, the statement says, adding that the new governor “endorses the rate decision and measures announced.”

The bank also announced it was reducing the frequency of its term repo operations and purchases of bankers’ acceptances citing improvements in short-term funding conditions.

Other programs to purchase federal, provincial, and corporate debt will continue unchanged, the bank says, but adds it could change tactics in response to economic conditions.

“As market function improves and containment restrictions ease, the Bank’s focus will shift to supporting the resumption of growth in output and employment,” the statement says. “The Bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway.”

Economic reports continue this week with Statistics Canada’s look at the May jobs market scheduled for release Friday.

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

Comments are closed

Just Posted

Sunflower Highway, art initiative to connect Fraser Valley, Thompson-Nicola and Okanagan

Sunflowers made out of reclaimed materials will be installed on public art trails

Residents warned to stay away from flooded Cache Creek park

Water might look shallow, but is several feet deep in places

Ashcroft receives grants to get new hot tub and lift station

‘The hot tub is a major benefit for many residents’

Cache Creek gets funding for improvements on Old Cariboo Road

Work will help to mitigate damage from water and debris flows during flooding

Pool opening provides ‘return to normality’ in an uncertain time

Ashcroft Pool has opened its doors for a shortened summer season

The pandemic is widening Canada’s workplace gender gap

Gender pay gap is incentivizing fathers to work while mothers watch children, a new B.C. study has found

Ex-Okanagan Mountie forfeits 20 days’ pay after sexual misconduct review

A former Vernon RCMP constable made sexual comments, grabbed genitals of male officer in two incidents 10 years ago

Man found dead on Okanagan trail identified as Hollywood actor

GoFundMe campaign launched for man found dead at summit of Spion Kop

3 people dead in Prince George motel fire

Fire personnel believe the blaze was suspicious although investigation in early stages

B.C. sets terms to review police, mental health, race relations

MLAs to recommend Police Act changes by May 2021

Feds announce $8.3M to deal with ‘ghost’ fishing gear in B.C. waters

Ghost gear accounts for up to 70 per cent of all macro-plastics in the ocean by weight

Almost 99% less land in B.C. burned this year compared to 2018

2018 was the worst year on record for wildfires

B.C. orders Coastal GasLink to stop pipeline construction near protected wetlands

The 670-kilometre pipeline is planned to transport natural gas from northeast B.C. to Kitimat

Most Read