The Bank of Canada (BoC) maintained its benchmark interest rates unchanged at 0.25 percent on Wednesday, as widely expected. At the same time, the Bank adjusted its quantitative easing (QE) program to a target pace of CAD2 billion per week, down from CAD3 billion per week earlier.

In its policy statement, the Canadian central bank noted:

• QE program’s adjustment reflects continued progress towards recovery and its increased confidence in the strength of the Canadian economic outlook;
• Falling COVID-19 cases, progress on vaccinations and easing containment restrictions all point to strong pickup in H2;
• Bank now expects GDP growth of around 6 percent in 2021 - a little slower than was expected in April - but has revised up its 2022 forecast to 4.5 percent and projects 3.25 percent growth in 2023
• Consumption is expected to lead recovery as households return to more normal spending patterns;
• Employment has once again begun to rebound, and the BoC expects the hardest-hit segments of the labour market to post strong gains as economy re-opens;
• With higher gasoline prices and on-going supply bottlenecks, inflation is likely to remain above 3 percent through H2 and ease back toward 2 percent in 2022, as short-run imbalances diminish and considerable overall slack in economy pulls inflation lower;
• Factors pushing up inflation are transitory, but their persistence and magnitude are uncertain and will be monitored closely;
• Governing Council judges that recovery continues to require extraordinary monetary policy support;
• BoC remains committed to holding policy interest rate at effective lower bound until economic slack is absorbed so that 2 percent inflation target is sustainably achieved. In the Bank’s July projection, this happens sometime in H2 of 2022;
• Decisions regarding further adjustments to the pace of net bond purchases will be guided by Governing Council's ongoing assessment of strength and durability of the recovery;
• BoC will continue to provide appropriate degree of monetary policy stimulus to support recovery and achieve inflation objective