The full report is below.
All the best,
Bank of Canada in action!
The Bank of Canada cut the overnight rate by 50 basis points to 0.5% in early March and
made two uncharacteristically candid statements. First, the Bank vowed to maintain the
0.5% rate "at this level or lower" until the economy shows sufficient strength to close the
output gap, thereby mitigating the downside risks to the inflation outlook. Secondly,
policymakers indicated that they were contemplating adding stimulus to the economy
through some form of quantitative or credit easing, the details of their ruminations will be
announced in mid April.
There was a note of optimism in the statement as the Bank asserted that fiscal and
monetary policy stimulus will support the economy in the second half of the year. Additionally,
the Bank views Canada as being in a better position than most countries and
forecasts a stronger rebound once the global economy stabilizes. Our base case view is
that the amount of fiscal and monetary policy stimulus will return the economy's growth
rate to the positive column later this year but given the upheaval in the global economy,
a shift to less-traditional measures cannot be ruled out if the economy fails to revive.
The inclusion of the reference to quantitative and credit easing
indicates that the Bank is keeping its options open as it works to nurse the economy back
to health and that policymakers here are ready to follow the lead of the U.S., U.K. and
others in moving to more innovative ways to attack the problems.