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Bank of Canada holds benchmark rate steady, updates economic outlook

General Angela Calla 9 Dec

This morning in its 10th and likely final policy decision of 2020, the Bank of Canada left its target overnight benchmark rate unchanged at what it describes as its “lower bound” of 0.25%. As a result, the Bank Rate stays at 0.5% and the knock-on effect is that borrowing costs for Canadians will remain low for the foreseeable future.

The Bank also updated its observations on the state of the economy, both in Canada and globally and pledged to continue to support market liquidity through its quantitative easing program.

These are the highlights of today’s BoC announcement:

  • Economic momentum heading into the fourth quarter appears to be stronger than was expected in October but, in recent weeks, record high cases of COVID-19 in many parts of Canada are forcing re-imposition of restrictions, which can be expected to “weigh on growth in the first quarter of 2021 and contribute to a choppy trajectory until a vaccine is widely available”
  • Near term, waves of COVID-19 are expected to “set back recoveries” in many parts of the world
  • It is maintaining what it calls its “extraordinary forward guidance,” reinforced and supplemented by its QE program, which continues at its current pace of “at least” $4 billion per week
  • The labour market continues to recoup the jobs that were lost at the start of the pandemic, albeit at a slower and “highly uneven pace” across different sectors and groups of workers
  • Commodity prices, including for oil, are being pushed by up stronger demand
  • A broad-based decline in the US exchange rate has contributed to a further appreciation of the Canadian dollar
  • The federal government’s recently announced measures should help maintain business and household incomes during this second wave of the pandemic and support the recovery

Of note, the BoC commented on a pick up – to 0.7% – in CPI inflation in October, largely reflecting higher prices for fresh fruits and vegetables. This suggests a “slightly firmer track for inflation” in Q4 but measures of core inflation are all below 2%, and “considerable economic slack” is expected to continue to “weigh on inflation for some time.”

Looking ahead

The Bank’s Governing Council acknowledged that Canada’s economic recovery continues to require “extraordinary monetary policy support.” Accordingly, it will hold its policy interest rate at the lower bound until economic slack is absorbed so that the Bank’s 2% inflation target is sustainably achieved.

In its October projection, the BoC suggested that the inflation target may be achieved “into 2023.” It provided no further update on this projection. It did however reiterate its commitment to keep interest rates low across the yield curve by using its QE program until the recovery is well underway.

BoC’s next scheduled policy announcement is January 20, 2021. We will provide an update following that announcement and as always, you can find other capital market insights on the Resources page of this website.

Read the full Bank of Canada Press Release here.


Angela Calla is a 16-year award-winning woman of influence and mortgage expert. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. She educates and empowers individuals on the “The Mortgage Show”, which she’s hosted for over a decade and is the best selling author of The Mortgage Code available on Amazon. All proceeds from her book sales are donated to the YWCA helping empower women and children in our community. Additionally, in August of 2020 she surpassed $1 Billion dollars in funded personal mortgage volume at the young age of 37.

Angela leads by example with passion and conviction. She is known as an industry expert on TV and radio and the go-to source for publishers across the Country. She has even been known to sign the national anthem at sporting events! On top of all her achievements, Angela finds the time to be a loving wife and mother of two beautiful children.

For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or 604-939-8777.