Bank of Canada Interest Rate Decision

Interest Rates Held Unchanged at 0.25% which was widely expected.

Key Comments from the BOC:

1. BoC reiterates that pace of net purchases of the government of Canada bonds will be adjusted as required.
2. BoC reiterates that its January projection does not expect economic slack to be absorbed until some point in 2023.
3. Overall Canadian inflation then expected to moderate as base-year effects dissipate and excess capacity continues to exert downward pressure.
4. Overall Canadian inflation is likely to move temporarily to around the top of the band in the next few months.
5. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.
6. The spread of more transmissible variants of covid-19 poses the largest downside risk to activity.
7. The housing market activity has been much stronger than expected.
8. Canadian GDP growth in Q1 of 2021 is now expected to be positive, rather than the contraction forecast in January.
9. CPI inflation is near the bottom of the 1-3% target band but is likely to move temporarily to around the top of the band in the next few months.
10. Despite the stronger near-term outlook, there is still considerable economic slack and a great deal of uncertainty about the evolution of the virus and the path of economic growth.
11. We will maintain extraordinary forward guidance, reinforced and supplemented by its QE program, which continues at its current pace of at least C$4 billion per week.

== TECHNICAL REACTION ==

USDCAD was a bit bullish from initial reaction. Earlier we had no so great CPI data from the US which was weakening this pair heading into the BOC. Since the announcement USDCAD rose from around 1.2620 to about 1.2655. Not much movement there