Bank of Canada says economy likely hit bottom in April, key interest rate unchanged

By Richard Dettman, Hana Mae Nassar, and The Canadian Press

OTTAWA (NEWS 1130) – The economy likely hit bottom in April, according to the Bank of Canada, with three million jobs lost due to lockdowns from the coronavirus pandemic.

It’s opted to keep its key interest rate at 0.25 per cent in response to what it calls the “extreme uncertain” outlook from the health crisis, and plans to keep it there until the picture improves.

However, the central bank says the economy is picking up notably as restrictions are eased.

“This return to growth reflects the relaxation of necessary containment measures put in place to slow the spread of the coronavirus, combined with extraordinary fiscal and monetary policy support,” a Bank of Canada release says.

In its updated outlook, the bank expects the economy to contract by 7.8 per cent this year. The report pegs the annual inflation rate at 0.6 per cent this year, rising to 1.2 per cent in 2021 and 1.7 per cent in 2022.

The Bank of Canada does not expect the economy to reach its pre-COVID-19 level until 2022.

The forecasts come with a caution that the numbers could be thrown off if there is a severe second wave of the novel coronavirus, for instance.

“As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support,” the bank’s statement says. “The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.”

Richard Dettman will have more in Business at :26 and :56.

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