The Bank of Canada maintained its overnight policy rate at 0.25 per cent this morning, a level it considers to be its effective lower bound. The Bank also announced additional new measures to support the Canadian financial system. In its statement, the bank noted that efforts necessary to contain the spread of COVID-19 have caused a sudden and deep contraction in economic activity and employment worldwide. The bank judges the current outlook to be too uncertain to provide a complete forecast, though it expects real GDP growth to decline 1-3 per cent in the first quarter of 2020 and a further 15-30 per cent (annualized) drop in the second quarter.To offset any potential dysfunction in financial markets and to keep credit channels operating smoothly, the Bank will continue its purchase of Government of Canada as well as provincial government, and even investment grade corporate bonds in the secondary market. These measures, along with those implemented by the Federal Government, will help to ease pressure on Canadian borrowers at all levels, from large corporations, to small businesses to households.
