Canada holds lending rate at 0.25pc

Ottawa: The Bank of Canada on Wednesday held its key lending rate at 0.25 percent, estimating that interest rates will need to stay at historic lows until the economy fully recovers, probably in 2023.

In a statement, the central bank said fourth quarter growth is expected to "slow markedly, due in part to rising Covid-19 case numbers," and revised downward its forecast to -5.5 percent economic growth in 2020, followed by 4.0 percent in 2021 and 2022.

The central bank´s governing council, it said, "will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that (the bank´s) two percent inflation target is sustainably achieved."

Inflation is currently at about 0.5 percent.

A rebound in employment and gross domestic product, the central bank said, was stronger than expected when lockdowns were lifted and the economy reopened through the summer.

"The economy is now transitioning to a more moderate recuperation phase," it said.

Going forward, the bank predicted growth would be "choppy" and demand would be influenced by "the evolution of the virus and its impact on consumer and business confidence."