The Bank of Canada (BoC) announced on Wednesday, it kept the key interest rate unchanged at 0.25%, as expected. Analysts at the National Bank of Canada explained the “central bank unveiled significant new measures to support the financial system, including more aggressive GoC T-bill/bond purchases and new facilities to buy provincial and corporate bonds, plus lengthier term repos.”
Key Quotes:
“First off, there’s no surprise on the policy interest rate front, which was universally seen by economists as remaining at 0.25%. But the real focus was on asset purchases and the Bank did not disappoint. As we’ve seen with the US Fed, the BoC has dramatically expanded its reach when it comes to asset purchases. Extra buying of GoC bonds and bills will help absorb the extraordinary amount of financing Ottawa needs to carry out its fiscal relief package.”
“The addition of provincial and corporate bonds adds material support to these sectors of the market. Collectively, the unprecedented policy response (in Canada and across the globe) should bolster investor confidence and help put in place conditions for a partial economic recovery. And there could be more yet to come.”
“Policy makers are focused on building the proverbial bridge to a post-COVID-19 world and at this point, have left few stones unturned. As Governor Poloz quipped in the Bank’s prior interest rate decision, “a firefighter has never been criticized for using too much water.”
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