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:

• Canada’s economy is proving to be more resilient than anticipated to second wave of Covid and associated containment measures;
• GDP growth in Q1 is now expected to be positive, rather than contraction forecast in January;
• Consumers and businesses are adapting to containment measures, and housing market activity has been much stronger than expected; improving foreign demand and higher commodity prices have also brightened the prospects for exports and business investment;
• Despite stronger near-term outlook, there is still considerable economic slack and uncertainty about evolution of the virus and economic growth;
• Labour market is long way from recovery;
• Spread of more transmissible variants of the virus poses largest downside risk to activity;
• CPI inflation is near the bottom of 1-3 percent target band but is likely to move temporarily to around top of the band in next few months due to base-year effects;
• While economic prospects have improved, BoC’s Governing Council judges that recovery continues to require extraordinary monetary policy support;
• We remain committed to holding policy interest rate at the effective lower bound until economic slack is absorbed so that 2 percent inflation target is sustainably achieved (BoC’s January projection suggests this does not happen until into 2023);
• To reinforce this commitment and keep interest rates low across the yield curve, BoC will continue its QE program until recovery is well underway;
• As Governing Council continues to gain confidence in the strength of recovery, the pace of net purchases of Government of Canada bonds will be adjusted as required;
• We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.