Mortgage Blog

Bank of Canada Rate Announcement - January 20, 2021

January 20, 2021 | Posted by: Ken Fadel

In its first announcement of 2021, the BoC left its target for the overnight benchmark rate unchanged at 0.25%.  Prior to the announcement, there was some speculation that the Bank would make a “micro-cut” to the rate, but this did not happen.

The BoC also updated its views on the state of the economy and pledged to continue to support market liquidity via its quantitative easing program.

While our economy had strong momentum through late 2020, the resurgence of COVID-19 cases and the reintroduction of lockdown measures presented “a serious setback”.  Growth in the Canadian economy in Q1 2021 is now expected to be negative.  Assuming lockdown restrictions are lifted later in the first quarter, the BoC expects the Canadian economy will grow by 4% in 2021 and almost 5% in 2022 – a modest upward revision from the projections contained in its last Monetary Policy Report of October 2020.

Any BoC economic projections depend on important assumptions about how the pandemic will evolve.  It assumed that the vaccine rollout will proceed largely as announced by government officials and that Canada and other advanced economies will achieve “broad immunity by the end of 2021.”

The BoC also reiterated earlier projections suggesting that its rate target will remain unchanged until sometime in 2023.

The BoC’s next scheduled policy announcement is March 10th. 

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