Bank of Canada keeps policy unchanged

Source: Dukascopy Bank SA
On December 8, the Bank of Canada published its Rate Statement and Overnight Rate. The central bank kept its interest rate and government bond holdings unchanged.

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank's extraordinary forward guidance on the path for the overnight rate is being maintained. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds roughly constant.

The Governing Council judges that in view of ongoing excess capacity, the economy continues to require considerable monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank's October projection, this happens sometime in the middle quarters of 2022. We will provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation target."

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Bank of Canada maintains policy rate and forward guidance

The announcement caused an initial jump of 37 base points or 0.29% on the USD/CAD charts.

On a larger scale, initially the announcement did not appear to cause an increase of volatility or a change of direction.

Initial Reaction

Larger scale situation

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