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Bank of Canada Rate Update During The Covid-19 Pandemic

Yesterday the Bank of Canada stated they would continue the overnight rate of 0.25%. The current Bank of Canada rate corresponding 1/2 percent and the deposit rate is a quarter percent. This is also known as a short term liquidly program resulting in a higher functioning market. The intended effect will be reduced market strains. This is a result of the current market which is unpredictable due to the Covid-19 pandemic. The Bank of Canada has maintained their current level of policy rate. Given the unpredictability of the current market the quantitative easing program has been put into place to engage lending and investments for households and businesses. As the Canadian economy continues to recover from the shutdown of Covid-19 businesses begin to re-open. With consumer and financial industry sentiment improving, we can expect to see economic growth, however it will be slow. With the reopening, signs begin to form for a bounce back in employment. The next announcement from the bank of Canada is set to take place September 9th, 2020 which again, no changes are expected to be made. If market conditions warrant, the Bank of Canada will adjust their programs. Between April-to-June about 15 per cent of Canada’s GDP period has been shaved off due to lock downs and other physical distancing efforts across Canada the bank states. That makes for the worst quarter for Canada’s economy since the Great Depression, but it’s actually better than the worst-case scenario the bank was tracking when the pandemic began. Until inflation reaches the banks target of 2% the interest rate wont move. Although there is a small chance that inflation will rise if your considering to mage a major purchase and or investment you can be confident that interest rates will be low for a long time. The consumer price index has dropped by 0.4 percent due to the pandemic it has reduced consumer spending although because of the bank of Canada’s 5 billion dollar per week large scale assets purchases of the Canadian government bonds.  This will increase the timing and pace of recoveries in the market varying between regions.