The Bank of Canada kept its key interest rate target steady Wednesday as it warned the fourth wave of Covid-19 and supply bottlenecks could weigh heavy on the country’s economic recovery.
The central bank held its target for the overnight rate at 0.25 per cent, what it calls the effective lower bound, and said it will also maintain its quantitative easing program by buying bonds at a target pace of $2 billion per week.
“The governing council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support,” the bank said in its decision.
Just last week Statistics Canada reported that the country’s gross domestic product declined in the second quarter.
The central bank said is continues to expect the economy to strengthen in the second half of the year, though the fourth wave of the pandemic and ongoing supply-chain issues may yet present obstacles for Canada’s recovery.