The Bank of Canada is holding the overnight interest rate to 0.25%, and several economists are predicting those near-zero rates to stay for at least two years.
The BOC also announced it will continue aggressive quantitative easing policies to inject liquidity into the Canadian economy, as it recovers from the shocks of the COVID-19 pandemic. It has been buying Canadian government bonds at a rate of $5 billion per week.
“This QE program is making borrowing more affordable for households and businesses and will continue until the recovery is well underway,” the BOC said in a press news release Wednesday, July 15.
The bank indicated it will likely hold interest rates at near zero until inflation has reached 2%.
“As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support,” the BOC said.
“The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved.”
A survey of 16 economists compiled by Finder.com found that roughly two-thirds of economists predict the BOC will hold to its low interest rates until 2022 or 2023 – an indication of just how long it may take for the Canadian economy to recover from the COVID-19 pandemic shock.
It also found that a majority of the economists think Canada’s GDP will shrink by 6% to 8% in 2020.
This article originally appeared here.
