Bank of Canada (BoC). The Monetary Authorities Have Closed the Door on Lowering the Target Rate

As the second wave of COVID-19 continues to spread and several public health measures are reintroduced, the economic conditions have deteriorated significantly across the country. As a result, the BoC’s latest scenario includes the Canadian economy slumping further, with a 2.5% reduction (quarterly annualized variation) in real GDP in the first quarter. We believe that this decline may end up being even greater, since the toughness of the measures introduced recently has reached a level similar to that last seen in the spring of 2020. Under these circumstances, some investors were hoping that the BoC would slightly reduce the lower bound of its key rates. Still, the monetary authorities have closed the door by reiterating their intention to leave the target for the overnight rate at its lower bound of 0.25% until 2023.