In its latest key interest rate announcement, the Bank of Canada said that it will continually adjust its policies in response to economic conditions, although its programs to manage the nation’s debt will remain unchanged.
“As market function improves and containment restrictions ease, the Bank’s focus will shift to supporting the resumption of growth in output and employment,” the BoC said. “The Bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway.”
The central bank held its overnight rate target at 0.25% on June 3, citing the Canadian economy’s fundamental robustness.
The rate announcement came on the first day of Tiff Macklem’s term as the BoC’s new governor, succeeding Stephen Poloz’s seven-year tenure.
BoC’s revised forecasts now estimate the GDP to drop between 10% and 20% annually by the end of 2020 – a more manageable decline than the 15%-30% range predicted in April.
“Decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown on disposable income and helping to lay the foundation for economic recovery,” the bank said.
Industry players said that the decision came as no surprise, considering the BoC’s commitment to maintaining stability amid the COVID-19 pandemic.
“The historically low mortgage rates currently in the market are here to stay until the economy approaches the level it was at before the pandemic started,” said James Laird, co-founder of Ratehub.ca and president of CanWise Financial. “This means that anyone with a variable rate can expect prime to remain unchanged. Fixed rates will stay near historic lows.”