BOC leaves interest rates unchanged, publishes robust GDP forecast, USD/CAD drops below 1.2650

Yohay Elam FXStreet

The Bank of Canada has left its interest rate unchanged at 0.25% as anticipated. In its accompanying statement, the Ottawa-based institution said that inflation is set to return to 2% in a sustainable manner by 2023.

Regarding the bond-buying scheme, the BOC has decided to leave it at around C$4 billion/week after squeezing it beforehand. However, it has said that it could adjust the program as the economy recovers. Hints of further tapering down are supporting the Canadian dollar.

On the other hand, the bank has warned that the resurgence of COVID-19 cases and the consequent lockdowns serve as a setback.

The bank estimates that Gross Domestic Product fell by 5.5% in 2020, and forecasts a rebound of 4% in 2021 and nearly 5% in 2022.

USD/CAD has dropped sharply from around 1.27 to 1.2650.

The BOC was broadly expected to leave its interest rate unchanged at 0.25%. Governor Tiff Macklem surprised markets in the previous meeting by shrinking the bank's bond-buying scheme. Apart from announcing its rate decision, Macklem and Deputy Governor Carolyn Wilkins will hold a press conference later on.

Earlier, Canada reported a drop of 0.2% in the monthly Consumer Price Index, lower than expected. Dollar/CAD traded around 1.27 ahead of the publication.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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