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

In its policy statement, the Canadian central bank noted:

• With COVID-19 cases falling in many countries and vaccine coverage rising, global economic activity is picking up. Growth remains uneven across regions, however;
• Financial conditions remain highly accommodative, reflected in broadly higher asset prices;
• Commodity prices have risen further, notably oil, and the Canadian dollar has seen a further appreciation;
• Economic developments in Canada have been broadly in line with BoC’s outlook in April Monetary Policy Report (MPR);
• Renewed lockdowns associated with coronavirus third wave are dampening economic activity in the second quarter, largely as anticipated;
• The Canadian economy is expected to rebound strongly, led by consumer spending;
• CPI inflation has risen to around the top of the 1-3 percent inflation-control range, due largely to base-year effects and much stronger gasoline prices; Core measures of inflation have also risen, due primarily to temporary factors and base year effects, but by much less than CPI inflation;
• While CPI inflation will likely remain near 3 percent through the summer, it is expected to ease later in the year, as base-year effects diminish and excess capacity continues to exert downward pressure;
• BoC’s Governing Council judges that there remains considerable excess capacity in the Canadian economy and that recovery continues to require extraordinary monetary policy support;
• We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved; this happens sometime in the second half of 2022, according to BoC’s April projection;
• BoC is continuing its QE program to reinforce this commitment and keep interest rates low across yield curve;
• Decisions regarding adjustments to the pace of net bond purchases will be guided by Governing Council’s ongoing assessment of strength and durability of recovery;
• We will continue to provide appropriate degree of monetary policy stimulus to support recovery and achieve inflation objective.