World News – CA – The Bank of Canada is putting key rate target on hold

The Canadian press
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OTTAWA –
The Bank of Canada keeps its interest rate target at 025 percent, saying that economic conditions still require it even if things are going better than expected

In a statement, the central bank expects economic growth to be positive in the first quarter of 2021, contrary to its previous January forecast for a decline at the start of the year

The bank’s top policymakers say the resilience of the economy has to do with consumers and businesses adapting to new rounds of lockdowns and restrictions

The statement also points to a stronger than expected real estate market as the driver of an expected increase in real gross domestic product in the first three months of the year

However, the central bank warns of significant uncertainty over the course of the pandemic, which is clouding the longer-term economic outlook, including how long it will take for the labor market to recover from its historic losses over the past year

The bank’s statement also points to new, more transmissible variants of COVID-19 as the greatest risk to an economic recovery The warning of localized outbreaks could “stunt growth and allow recovery to cool” “

The bank says its policy rate will stay at 025 percent until the economy recovers and inflation is back in its comfort zone of two percent, which won’t be the case until 2023

The central bank’s statement also said it will continue its quantitative easing program, which allows central banks to pump money into the economy

Royce Mendes, senior economist at CIBC, writes that the bank’s communique did not bring forward when the economy may heal enough to raise interest rates, which many experts now believe is late next year

The prime rate stood at 0 for almost exactly a year, 25 percent after the central bank cut rates three times in March last year at the start of the COVID-19 pandemic to bring them to the lower effective limit, which means they are so low as possible is

The Bank of Canada is expected to release its updated economic outlook as part of its quarterly monetary policy report late next month

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