Bank of Canada keeps key rate at 0.25%, maintains QE policy

September 8, 2021

OTTAWA (Reuters) -The Bank of Canada on Wednesday left its key interest rate unchanged at a record low 0.25%, as expected, as it warned supply chain disruptions and a fourth wave of COVID-19 infections could weigh on the country’s economic recovery.

The central bank, in a scheduled rate decision two weeks before a federal election, noted that Canada’s economy missed expectations in the second quarter, largely due to a contraction in exports, which were hit by supply chain disruptions.

“The Bank continues to expect the economy to strengthen in the second half of 2021, although the fourth wave of COVID-19 infections and ongoing supply bottlenecks could weigh on the recovery,” it said.

The Bank of Canada kept its guidance that interest rates would stay at their current record low until the economic slack is absorbed, expected in the second half of 2022.

“This was largely in line with expectations. I detected a hint of cautious optimism that the soft patch we’re going through is something they’re prepared to look through,” said Derek Holt, head of capital market economics at Scotiabank.

The central bank maintained its quantitative easing program at a target pace of C$2 billion ($1.6 billion) per week.

($1 = 1.2691 Canadian dollars)

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith and Nichola Saminather in Toronto and Nia WilliamsEditing by Nick Zieminski)

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