MNI BoC Review - October 2020: BOC Tapers & Twists QE, Resists Negative Rates

Policy Rate Steady at 0.25%, Pace Of QE Slowed

As anticipated, the BOC left the policy rate at the "effective lower bound" of 0.25% Wednesday, while policy makers reiterated the rate will remain there until slack is absorbed and inflation sustainably returns to their 2% target.

Recent renewed Covid-19 restrictions will hurt growth in coming months while major slack in the economy will keep inflation below 2% into 2023, the BOC said.

Not widely anticipated, however, was the drop total weekly bond purchases as the Bank recalibrates "QE program to shift purchases towards longer-term bonds," Governor Tiff Macklem and his deputies said in the statement.

"Given the expected impact from buying more longer-term bonds, the Governing Council judges that, as we gradually reduce our total weekly bond purchases from at least $5 billion to a minimum of $4 billion, our QE program will continue to provide at least as much stimulus as before."

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BOC October 2020 Review