As expected, the Bank of Canada (BoC) held interest rates and its purchase program unchanged. According to National Bank of Canada’s analysts, the introduction of a more explicit forward guidance reinforces expectations that the key rate will be on hold for a long time.
Key Quotes:
“While there weren’t many changes to Bank of Canada policy, the statement and accompanying MPR reads somewhat dovish to us as Macklem has made it abundantly clear that the policy rate is going to remain anchored at the effective lower bound for “a long time”. There weren’t any changes to the quantitative easing program but we fully expect this to continue at least through the current fiscal year and likely well beyond.”
“The introduction of more explicit forward guidance reinforces that the policy rate will be on hold for a long time, as the Bank’s current central scenario doesn’t have inflation reaching 2% in its projection horizon through 2022.”
“The MPR did note that “the economy has so far avoided the most severe scenarios presented in the April Report” but that it’s expected to enter a more protracted and gradual recovery with economic slack persisting.”
“Ultra-low rates across the term structure can be expected to remain for the foreseeable future with the Bank remaining extremely accommodative to support the economic recovery.”
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