The Bank of Canada announced on April 15 that it would keep its overnight rate target at 0.25 per cent and that no additional rate cuts should be expected.
This decision to hold rates steady came on the heels of three rate cuts in over a month, as the COVID-19 pandemic and plummeting oil prices exact a heavy toll on the Canadian economy.
“The necessary efforts to contain the COVID-19 pandemic have caused a sudden and deep contraction in economic activity and employment worldwide,” the bank said in a release.
“The sudden halt in global activity will be followed by regional recoveries at different times, depending on the duration and severity of the outbreak in each region. This means that the global economic recovery, when it comes, could be protracted and uneven.”
The bank expects these containment efforts, and the corresponding business shutdowns and layoffs, will continue to drastically impact the Canadian economy in the months to come. As a result, the bank predicts economic activity in the second quarter of 2020 will be between 15 and 30 per cent lower than in the fourth quarter of 2019.
The bank also announced that it would be ramping up a series of measures designed to help the economy. Chief among these is the buying up of government bonds and other debts.
The bank had previously announced it would purchase $5 billion in federal debt weekly. On Wednesday, the bank announced this would continue, but it would also buy up to $50 billion of provincial debt and $10 billion of corporate debt to maintain liquidity in the market.
“These measures will work in combination to ease pressure on Canadian borrowers,” said the bank. “As containment restrictions are eased and economic activity resumes, fiscal and monetary policy actions will help underpin confidence and stimulate spending by consumers and businesses to restore growth.”