Bank of Canada Rate Annoucement - June 9, 2021
June 9, 2021 | Posted by: Ken Fadel
This morning the BoC again left its target overnight benchmark rate unchanged at 0.25%. It also provided some positive thoughts on both the state and outlook of the Canadian economy.
First quarter GDP growth registered a strong 5.6%, and while that was lower than the BoC’s projection, the underlying fundamentals suggest rising consumer confidence and resiliency.
Economic activity to this point in the second quarter has been more muted due to the renewed lockdowns associated with the third wave of the pandemic, but this is not unexpected.
Inflation has risen to around the top of the BoC’s comfort zone, due in large part to comparisons with depressed 2020 numbers and rising gasoline prices. This is expected to last through the summer and ease later in the year as excess capacity in the economy exerts some downward pressure on prices.
While new COVID-19 variants definitely create uncertainty, as provincial restrictions continue an ease over the summer the BoC expects the Canadian economy to rebound significantly as consumer spending ramps up. The BoC also noted that with the housing market, “activity is expected to moderate but remain elevated.”
The BoC still maintains there is considerable excess capacity in the Canadian economy, and that the recovery will continue to require “extraordinary monetary policy support.” As such, it restated its commitment to holding its policy interest rate until economic slack is absorbed and its 2% inflation target is “sustainably achieved.” This is expected to occur sometime in the second half of 2022.
The next rate announcement is scheduled for July 14th.