The Bank of Canada held a monetary policy meeting today and announced after its conclusion that the policy remains unchanged. The Canadian dollar was not demonstrating a clear trend after the announcement, falling against some rivals and rising versus others.
As was widely expected, the BoC decided to stay pat, keeping its benchmark interest rate at 0.25% and the size of the quantitative easing program at least C$4 billion per week. The central bank was cautiously optimistic in its statement.
Regarding the developments in the global and Canadian economies, the bank said that they were in line with expectations. The coronavirus vaccines should be helping the economic recovery in the future but in the meantime, new waves of infections can slow the economic growth. The statement also pointed out that crude oil prices were rising, while the Canadian dollar appreciated on the back of the US dollar’s weakness.
Despite the largely optimistic outlook, the BoC stated that the recovery still needs support from monetary policy, therefore the bank plans to keep the policy accommodative and maintain quantitative easing for the time being:
Canadaâs economic recovery will continue to require extraordinary monetary policy support. The Governing Council will hold 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 our October projection, this does not happen until into 2023. To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its QE program until the recovery is well underway and will adjust it as required to help bring inflation back to target on a sustainable basis. We remain committed to providing the monetary policy stimulus needed to support the recovery and achieve the inflation objective.
USD/CAD opened at 1.2816, fell to the daily low of 1.2769, but has rebounded to 1.2828 by 18:48 GMT today. GBP/CAD was up from 1.7111 to 1.7149 but retreated from the session high of 1.7223. CAD/JPY traded at 81.30 after opening at 81.24 and rallying to the daily maximum of 81.63.
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