Bank of Canada leaves policy settings unchanged as expected

In a widely expected decision, the Bank of Canada (BoC) announced on Wednesday that it left its key rate unchanged at 0.25% following the June policy meeting. The BoC decided to maintain the target of C$3 billion in weekly net asset purchases of the government of Canada bonds as well.

Market reaction

The USD/CAD pair showed no immediate reaction to the BoC's policy decisions and was last seen losing 0.33% on the day at 1.2070.

Key takeaways from policy statement as summarized by Reuters

"Will hold policy interest rate at the effective lower bound until economic slack is absorbed and the 2% inflation target is sustainably achieved, in current projections this does not happen until H2 2022."

"Financial conditions remain highly accommodative, reflected in broadly higher asset prices."

"Commodity prices have risen further, notably oil, and the Canadian dollar has seen a further appreciation."

"Will continue QE program, decisions regarding the pace of net bond purchases will be guided by the Governing Council’s ongoing assessment of the strength and durability of the recovery."

"The Canadian economy is expected to rebound strongly, led by consumer spending, as vaccinations pick up and restrictions are lifted."

"We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective."

"Housing market activity is expected to moderate but remain elevated."

"The Governing Council judges that there remains considerable excess capacity in the Canadian economy and that the recovery continues to require extraordinary monetary policy support."

"While CPI inflation will likely remain near 3% through the summer, it is expected to ease later in the year, as base-year effects diminish and excess capacity continues to exert downward pressure."