The Bank of Canada (BoC) maintained its benchmark interest rates unchanged at 0.25 percent on Wednesday, as widely expected.

In its policy statement, the Canadian central bank noted:

• It is maintaining its extraordinary forward guidance, reinforced and supplemented by its QE program, which continues at its current pace of at least CAD4 billion per week;
• Uncertainty is still elevated, and outlook remains highly conditional on the path of the virus and the timeline for the effective rollout of vaccines;
• Arrival of effective vaccines combined with further fiscal and monetary policy support have boosted medium-term outlook for growth;
• BoC projects global growth to average just over 5 percent per year in 2021 and 2022, before slowing to just under 4 percent in 2023;
• Global financial markets and commodity prices have reacted positively to improving economic prospects;
• Broad-based decline in US exchange rate combined with stronger commodity prices have led to further appreciation of Canadian dollar;
• Resurgence of coronavirus cases and reintroduction of lockdown measures are serious setback; growth in Q1 is expected to be negative;
• Q2 rebound is expected to be strong;
• BoC sees decline in real GDP of 5.5 percent in 2020 to be followed by +4 percent in 2021 and almost +5 percent in 2022, and around +2.5 percent in 2023;
• CPI inflation is forecast to rise temporarily to around 2 percent in the first half of the year;
• Inflation is expected to return sustainably to 2 percent target in 2023;
• Governing Council will hold its policy interest rate at effective lower bound until economic slack is absorbed so that 2 percent inflation target is sustainably achieved. In our projection, this does not happen until into 2023;
• To reinforce this commitment and keep interest rates low across yield curve, Bank will continue its QE program until the recovery is well underway;
• As Governing Council gains confidence in strength of recovery, the pace of net purchases of Government of Canada bonds will be adjusted as required;
• We remain committed to providing appropriate degree of monetary policy stimulus to support recovery and achieve inflation objective