MNI POLICY: TEXT: BOC Monetary Policy Report Key Passages

By Greg Quinn

     OTTAWA (MNI) - Here are key passages from the Bank of Canada's Monetary

Policy Report, published Wednesday in Ottawa:

     *The Bank has used scenario analysis to estimate the level of real GDP to

be about 1 to 3 and 15 to 30 percent lower in the first and second quarters of

2020, respectively, than in the fourth quarter of 2019.

     *Despite a high level of uncertainty, these estimates suggest that the

near-term downturn will be the sharpest on record.

     *The direct and indirect effects of COVID-19 will weigh heavily on consumer

price index (CPI) inflation in the coming months, which is expected to slump to

close to 0 percent in the second quarter of 2020.

     *The Bank has used scenario analysis to estimate the level of real GDP to

be about 1 to 3 and 15 to 30 percent lower in the first and second quarters of

2020, respectively, than in the fourth quarter of 2019.

     *Despite a high level of uncertainty, these estimates suggest that the

near-term downturn will be the sharpest on record.

     *The direct and indirect effects of COVID-19 will weigh heavily on consumer

price index (CPI) inflation in the coming months, which is expected to slump to

close to 0 percent in the second quarter of 2020.

     *Given the uncertainty surrounding the outlook, the Bank has decided not to

present a base-case projection in this Report. As a result, the standard tables

the Bank normally includes to present the breakdown of the projection for global

economic growth and the contributions to the growth of Canada's annual real

gross domestic product (GDP) are also omitted from this Report. In addition, the

regular April updates of estimates of potential output growth and the neutral

nominal policy rate are deferred to the October 2020 Report.

     *While there may be a rebound in growth, output is likely to remain below

pre-pandemic levels for some time.

     *Stress tests indicate that Canada's large lenders are well positioned to

weather a severe economic and financial downturn.

     *The pandemic and the resulting control measures are having profound

effects on both demand and supply as well as causing extraordinary financial

market stress. This stress is disrupting the flow of credit and impairing the

transmission of monetary policy.

     *The Bank will closely monitor the effectiveness of its actions, as well as

the fiscal and other policy actions taken, and will assess whether output and

inflation are on self-sustaining paths toward the full employment level and the

2 percent inflation target, respectively.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

[TOPICS: M$C$$$]