Bank of Canada Makes Interest Rate Announcement

Wednesday Jun 09th, 2021

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BANK OF CANADA MAKES INTEREST RATE ANNOUNCEMENT

June 9th, 2021

  1. What is the Bank of Canada's current policy interest rate?
  2. When does the Bank of Canada announce its overnight rate?
  3. When is the next announcement?
  4. What factors did Bak of Canada consider in its latest decision?

 

BANK OF CANADA'S OVERNIGHT RATE

On June 9, the Bank of Canada maintained its target for the overnight benchmark rate at 0.25%

 

   The Bank of Canada has announced that it will hold its key interest rate target at 0.25%.  This rock-bottom rate has been in place since March 2020, when the pandemic prompted a trio of rate reductions in an effort to stimulate the economy.  The Bank is not expected to increase the rate until the economy recovers, likely toward the latter half of 2022.  The Bank’s quantitative easing (QE) program will continue at $3 billion per week.

   The Bank has cited some positive indicators, including vaccinations proceeding at a faster pace than originally anticipated, and stronger-than-expected household spending in early 2021.  The third wave of Covid-19 and the associated lockdowns dampened economic recovery in the second quarter, as was expected, but recovery is in sight.

 

BANK OF CANADA'S 2021 SCHEDULE FOR POLICY INTEREST RATE ANNOUNCEMENTS

 

Bank of Canada announces its decision for the overnight rate target eight times a year, typically on a Wednesday.

The schedule for 2021 is as follows:

  • January 20
  • March 10
  • April 21
  • June 9
  • July 14
  • September 8
  • October 27
  • December 8

The next interest rate announcement is scheduled for July 14, 2021.

 

“BANK OF CANADA TODAY HELD ITS TARGET FOR THE OVERNIGHT RATE…”

 

Read the release below:

"The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance on the path for the overnight rate. This is reinforced and supplemented by the Bank’s quantitative easing (QE) program, which continues at a target pace of $3 billion per week."

"With COVID-19 cases falling in many countries and vaccine coverage rising, global economic activity is picking up. Growth remains uneven across regions, however. The US is experiencing a strong consumer-driven recovery and a rebound is beginning to take shape in Europe, while a resurgence of the virus is hampering the recovery in some emerging market economies. Financial conditions remain highly accommodative, reflected in broadly higher asset prices. Commodity prices have risen further, notably oil, and the Canadian dollar has seen a further appreciation."

"In Canada, economic developments have been broadly in line with the outlook in the April Monetary Policy Report (MPR). Despite the second wave of the virus, first quarter GDP growth came in at a robust 5.6 per cent. While this was lower than the Bank had projected, the underlying details indicate rising confidence and resilient demand. Household spending was stronger than expected, while businesses drew down inventories and increased imports more than anticipated. Renewed lockdowns associated with the third wave are dampening economic activity in the second quarter, largely as anticipated. Recent jobs data show that workers in contact-sensitive sectors have once again been most affected. The employment rate remains well below its pre-pandemic level, with low wage workers, youth and women continuing to bear the brunt of job losses."

"With vaccinations proceeding at a faster pace, and provincial containment restrictions on an easing path over the summer, the Canadian economy is expected to rebound strongly, led by consumer spending. Housing market activity is expected to moderate but remain elevated. Strong growth in foreign demand and higher commodity prices should also lead to a solid recovery in exports and business investment. Despite progress on vaccinations, there continues to be uncertainty about the evolution of new COVID-19 variants. More broadly, the risks to the inflation outlook identified in the April MPR remain relevant."

"As expected, CPI inflation has risen to around the top of the 1-3 percent inflation-control range, due largely to base-year effects and much stronger gasoline prices. Core measures of inflation have also risen, due primarily to temporary factors and base year effects, but by much less than CPI inflation. While CPI inflation will likely remain near 3 percent through the summer, it is expected to ease later in the year, as base-year effects diminish, and excess capacity continues to exert downward pressure."

"The Governing Council judges that there remains considerable excess capacity in the Canadian economy, and that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s April projection, this happens sometime in the second half of 2022. The Bank is continuing its QE program to reinforce this commitment and keep interest rates low across the yield curve. Decisions regarding adjustments to the pace of net bond purchases will be guided by Governing Council’s ongoing assessment of the strength and durability of the recovery. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective."

 

PR & Content Manager

RE/MAX Canada

Lydia McNutt

 

blog.remax.ca


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