Bank of Canada Interest Rate Announcement - April 21, 2021
Posted by Ron Neal on Wednesday, April 21st, 2021 at 5:45pm.
Bank of Canada Interest Rate Announcement - April 21, 2021
| The Bank of Canada maintained its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. The Bank reiterated what it calls "extraordinary forward guidance" in committing to leaving the overnight rate at 0.25 per cent until slack in the economy is absorbed and inflation sustainably returns to its 2 per cent target. The Bank is now projecting that will occur in the second half of 2022 rather than in 2023. The Bank is also continuing its quantitative easing (QE) program, though it will be reducing its bond purchases from at least $4 billion of Government of Canada bonds per week down to $3 billion per week. In the statement accompanying the decision, the Bank noted that the economic recovery has been considerably stronger than forecast and noted risk associated with the rapid rise in home prices, a risk the Bank will continue to monitor. Strong growth in exports and business investment, along with additional fiscal stimulus from the federal and provincial governments are expected to push Canadian Real GDP growth to 6.5 per cent in 2021 and nearly 4 per cent in 2022. A dramatic re-set of market expectations for growth and inflation prompted a jump in government bond yields over the second half of February. However, since then bond markets have calmed with rates trending sideways for the past several weeks. As a result, Canadian mortgage rates have plateaued around 2.14 per cent on a five-year fixed rate. However, the Bank's announcement of a tapering of its QE program and an earlier date for potential future rate increases may put some upward pressure on mortgage rates in coming months, which along with the proposed 5.25 per cent minimum qualifying rate, could have a moderating influence on home sales through the summer. |
Link: https://mailchi.mp/bcrea/bank-
For more information, please contact:
| Brendon Ogmundson Chief Economist 604.742.2796 bogmundson@bcrea.bc.ca |
Kellie Fong Economist 778.357.0831 kfong@bcrea.bc.ca |
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