Bank of Canada doesn’t plan to increase interest rates in the nearest future

New central bank’s Governor says the Bank doesn’t plan to increase interest rates in the nearest future with today’s economic circumstances caused by the COVID-19 pandemic.

According to Tiff Macklem, the Bank of Canada focuses on providing low interest rates in order to support an economic recovery.

In addition to it, such decision could also reduce the debt-servicing costs households and businesses are facing now, especially if they borrowed more to make ends meet during this hard time.

Macklem says rates will rise only when Canada shows strong economic recovery, and it’s a long way.

As you know, the BoC has cut its key lending rate to 0.25%, which is the Bank’s lower limit. Moreover, it introduced unprecedented bond purchasing program aimed at improving credit flows in financial markets.

Macklem gave a speech during his first appearance as governor before the House of Commons finance committee.

“One day we will get through this, the economy will rebound and rates will get back to normal”, – he noted.

“However, it will be a long way”.

Macklem says the central bank’s focus during the first weeks of the crisis was rebuilding market conditions, and those attempts seem to be leading to conditions normalizing.

Now the BoC is switching its focus to the future path of monetary policy, and an important step will be taken in July, accompanied by an economic outlook.

According to Macklem, the Bank’s July monetary policy report will probably include best and worst case economic scenarios, and not figures for GDP or inflation as the pandemic course is unclear.

He noted the report will provide a discussion about potential risks for the national economy and the Bank’s target inflation rate.

Last month, the annual pace of inflation slowed down again, restrained by a gasoline prices decline from the previous year.

Statistics Canada says the consumer price index was down by 0.4% from a year ago, following another month of negative inflation with April reporting a drop by 0.2%.