Today was a regularly scheduled announcement date for the Bank of Canada (BoC). After an unprecedented month of March when the BoC chopped their key rate three separate times for a total decrease of 1.5%, there was no change in their key rate today. The BoC press release today was very important and I encourage all to read it completely if they can. I have bulleted the very important statements below. The Canadian economy has been relatively strong enough to rebound quickly after the COVID-19 pandemic subsides, but this will depend upon the length of the pandemic and depth of measures taken by government to avert severe recessionary effects. The link to read BoC’s entire press release is as follows: Click Here
• The Bank of Canada today maintained its target for the overnight rate at 0.25 percent, which the Bank considers its effective lower bound. The Bank also announced new measures to provide additional support to Canada’s financial system.
• The necessary efforts to contain the COVID-19 pandemic have caused a sudden and deep contraction in economic activity and employment worldwide. In financial markets, this has driven a flight to safety and a sharp repricing of a wide range of assets. It has also pushed down prices for commodities, especially oil. In this environment, the Canadian dollar has depreciated since January, although by less than many other currencies. The sudden halt in global activity will be followed by regional recoveries at different times, depending on the duration and severity of the outbreak in each region. This means that the global economic recovery, when it comes, could be protracted and uneven.
• an unprecedented drop in employment in March, with more than one million jobs lost across Canada. Many more workers reported shorter hours, and by early April some six million Canadians had applied for the Canada Emergency Response Benefit.
• The outlook is too uncertain at this point to provide a complete forecast. However, Bank analysis of alternative scenarios suggests the level of real activity was down 1-3 percent in the first quarter of 2020, and will be 15-30 percent lower in the second quarter than in fourth-quarter 2019. CPI inflation is expected to be close to 0 percent in the second quarter of 2020.