Bank of Canada Keeps Benchmark Interest Rate at Record Lows

Bank says 3rd wave of pandemic dampening economic activity in 2nd quarter

The Bank of Canada decided to keep its benchmark interest rate steady at a record-low 0.25 percent on Wednesday.

The central bank also said it would maintain its bond purchases at a target pace of $3 billion per week, a sign of continuing monetary support while economic activity picks up.

Despite another wave of COVID-19, first-quarter economic growth came in at a “robust” 5.6 percent, the bank said.

“While this was lower than the bank had projected, the underlying details indicate rising confidence and resilient demand. Household spending was stronger than expected, while businesses drew down inventories and increased imports more than anticipated.”

However, renewed lockdowns and other restrictions due to the third wave of the pandemic are dampening economic activity in the second quarter, largely as anticipated, the Bank of Canada said.

It said the employment rate remains well below its pre-pandemic level, with low-wage workers, youth and women continuing to bear the brunt of job losses.

The key lending rate has been on hold at its rock-bottom level since the onset of the pandemic last year and the central bank has said it won’t increase the rate until the economy has recovered.

Wednesday’s announcement points to recovery sometime in the second half of 2022.


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