The measures taken by the Bank of Canada to address problems with market functioning and confidence show signs of succeeding, the BoC said in its Financial System Review.
Additional takeaways
"The bank's facilities and purchase programs are being used less now than at inception."
"BoC continues to assess the impacts of its measures and can adjust the scale of programs as market conditions change."
"Many paths to recovery are possible; policy support will need to be flexible and adapt as the situation evolves."
"Strong policies have put a floor under the Canadian economy and laid a strong foundation for its recovery; federal government support for households and firms is directly mitigating income losses."
"Demand effects are rooted in income losses and uncertainty about just how bad things could get."
"Energy sector's ability to secure refinancing will be particularly tested with low oil prices; sector will be helped by new credit programs being developed."
"COVID‑19 shock, riskier firms are finding it difficult to access more fragile markets, such as the US leveraged loans market."
"Despite mortgage deferrals and the added borrowing, some households are likely to fall behind on their loan payments."
"Longer the income shock lasts, the greater the risk of a rise in consumer insolvencies; what started as a cash flow problem could develop into a solvency issue for some businesses."
"Financial system remains resilient but the outlook for the Canadian economic activity is highly uncertain; Canada's six largest commercial banks are in a good position to manage the consequences."
Market reaction
The USD/CAD pair edged higher on these remarks and was last seen gaining 0.25% on the day at 1.4135.
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