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Bank of Canada to hold interest rates at policy meeting


Bank of Canada to hold interest rates at policy meeting

Canada WSJ
Photo: WSJ

The Bank of Canada (BoC) is set to hold interest rates at 0.25% at today’s policy meeting as the country begins to ease COVID-imposed restrictions and looks towards economic recovery.

April data showed annual inflation in Canada turned negative for the first time since 2009 as COVID-19 continued to negatively affect economies worldwide. In response to the pandemic, the BoC cut interest rates three times and established a quantitative easing program under which it has purchased over $7 billion worth of corporate bonds and nearly $37 billion worth of provincial bonds.

Moving forward, the BoC is not expected to deviate far from its current strategy of quantitative easing and holding interest rates. Incoming Governor Tiff Macklem, whose seven-year term begins today, has stated that traditional forms of stimulus will be needed to stem losses and stabilise the economy. Analysts anticipate Macklem will expand asset purchases instead of turning to negative rates. In the medium-term, expect a moderate monetary policy that aims to support, not lead, fiscal policy initiatives such as infrastructure spending.

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