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

Just Posted

North Delta yoga studio’s Fridays at the Farm to benefit local animal sanctuary

The outdoor four-class series will benefit Perfect Pastures Animal Sanctuary in Ladner

Wanted Burnaby man arrested in White Rock

34-year-old facing 15 charges, including sexual assault

Jamie Bacon pleads guilty to charge in Surrey Six case

The plea brings an end to a complex legal case that has spanned more than a decade

North Delta crime beat, week of June 27

A selection of property crimes submitted weekly by the Delta Police Department

South Delta crime beat, week of June 27

A selection of property crimes submitted weekly by the Delta Police Department

Horgan says B.C. restart making gains as more people come out of their homes

B.C. announced the easing of more restrictions on businesses, recreation and travel last month

Conservatives say police should be called into investigate WE charity scandal

Trudeau is already under investigation by the ethics commissioner for potential conflict of interest

Amber Alert continues for missing Quebec girls, 6 and 11, and their father

Police issued the alert for Norah Carpentier, 11, and Romy Carpentier, 6, from Levis, Que.

Limit police access to lethal weapons in Indigenous communities: Justice Summit

Grassroots-organized National Indigenous Justice Summit was a free-to-attend two-day videoconference

Mayors welcome rideshare expansion to eastern Lower Mainland

As of Thursday, Lyft is now offering service throughout Metro Vancouver

Canadian policing organization calls for decriminalization of simple illicit drug possession

Canadian Association of Chiefs of Police want policing focus of opioid crisis to be replaced with a health one

Filing deadline in RCMP sexual-harassment class-action extended due to COVID-19

Plaintiffs now have until January 2021 to submit claims for up to $222,000

Hefty undeclared driver charges piling up, ICBC warns customers

Average extra penalty $2,971 after an at-fault accident

Survey, hotline launched amid probe into racist blood-alcohol guessing game at B.C. hospital

Mary Ellen Turpel-Lafond has been appointed to lead an investigation by Health Minister Adrian Dix

Most Read