BREAKING: Bank of Canada keeps key interest rate target on hold
in response to what it calls the "extremely uncertain" economic outlook from the COVID-19 pandemic, and plans to keep it there until the picture improves., the bank said Wednesday it expects the economy to contract by 7.8 per cent this year, driven downward by a year-over-year contraction of 14.6 per cent in the second quarter.
The bank's outlook is based on the assumption that there won't be a broad-based second wave of the pandemic, that lockdowns will be gradually lifted, and the pandemic will have run its course by mid-2022 thanks to a vaccine or effective treatment. The central bank's key interest rate has been at 0.25 per cent since March when it was rapidly dropped in response to the economic fallout from COVID-19.
Much of that will be driven by the reopening of businesses and partial rebound in spending, the bank says. The bank said the pandemic will continue to affect consumer and business confidence during this phase amid widespread changes in the economy, including the energy sector where low prices and reduced demand have put production well below its pre-pandemic path.
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