Canada Holds Key Interest Rate at 0.25%... Reduction in Quantitative Easing Scale

[Photo by Reuters-Yonhap News]

[Asia Economy Reporter Byunghee Park] The Bank of Canada, the central bank of Canada, on the 14th (local time) kept the benchmark interest rate unchanged at the current 0.25%.

The Bank of Canada held a regular monetary policy meeting on the day and decided to keep the interest rate unchanged, stating that the inflation rate is expected to remain at around 2.0% until next year, according to CBC and other broadcasters.

In a statement, the Bank of Canada said it has no plans to raise interest rates until the inflation rate is maintained, adding, "Based on the current outlook, the possibility exists around the second half of next year." Accordingly, the broadcast explained that the benchmark interest rate freeze is expected to continue for at least one more year.

In May, Canada's consumer price inflation rate recorded 3.6%, the highest since May 2011. However, the Bank of Canada expects this surge in prices to be temporary. The Bank of Canada explained that such inflation is expected to return to a more normal range once transitional imbalances such as supply and demand of consumer goods, logistics disruptions, and the global semiconductor shortage are resolved.

Instead of raising the benchmark interest rate, the Bank of Canada decided to reduce the scale of government bond purchases to 2 billion Canadian dollars (approximately 1.8 trillion Korean won) per week. In its statement, the Bank of Canada said, "Further adjustments to the scale of bond purchases will be determined based on assessments of the strength and sustainability of the economic recovery."

Right after the COVID-19 outbreak in April last year, the Bank of Canada set the weekly government bond purchase scale at a minimum of 5 billion Canadian dollars, later adjusting it to a maximum of 5 billion Canadian dollars, and at the policy meeting last month, it lowered it to 3 billion Canadian dollars.

This content was produced with the assistance of AI translation services.