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The Bank of Canada Holds Key Rate Unchanged, 0.25%

The Bank of Canada Holds Key Rate Unchanged, 0.25%

Kaithleen Pesantez,

Bank of Canada Main Talking Points:

  • BoC held its target for overnight rate at the lower bound of 0.25%, bank rate at 0.5%, and deposit rate at 0.25%
  • Reports economic slack has now been absorbed with the Bank removing its forward guidance

The Bank of Canada

decided to hold its target for rates and remove its forward guidance policy on interest rates. The bank is continuing to stay within it’s reinvestment phase by keeping its overall holdings of Government of Canada bonds constant.

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Economic Calendar

Canada's GDP

in the second half of 2021 gave the economy momentum to enter 2022 strong and indicated that economic slack was absorbed. The job market remained robust with employment record levels up by 240k vs pre-pandemic. Although Omicron is weighing in, impact on this wave is expected to be less severe than previous with economic growth expected to bounce back from consumer spending on services, strength in exports and business investments.

Immediate Reaction

to the decision, USD/CAD rose from 1.2570 to 1.2630. This was largely on the fact that markets had attached an 80% probability of a rate hike at today's meeting, therefore, the decision to leave rates unchanged prompted an unwind in rate hike bets, weighing on the Canadian Dollar.

--- Written by Kaithleen Pesantez, Market Strategist for DailyFX.com

Contact and follow Kaithleen on Twitter: @ktpesantez

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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