Bank of Canada Signals Interest Rates Will Remain at 0.25% Until 2023 as Output Gap Continues to Subdue Economic Growth

The Bank of Canada (BoC) has signaled it will keep interest rates at the lower bound of 0.25% for at least the next few years, citing the economy’s excess supply as the downward pressure on a full recovery.

On Wednesday, the BoC unveiled its Monetary Policy Report for the month of October, announcing that it will take until at least 2023 before Canada’s economy is back on track to pre-pandemic levels. As a result, the central banks plans to keep interest rates historically low for the foreseeable future. Given that excess supply continues to burden the Canadian economy despite a moderate recovery over during the summer, inflation will nonetheless remain suppressed until at least 2022.

According to Governor Tiff Macklem’s policy makers, Canada’s economy will continue to suffer from a significant gap between actual output and potential output, which will not contract within the next three years. The economy has now progressed into the “recuperation” phase, which means although it will still continue to rebound, it will do so in lengthy and uneven segments that will vary across sectors – especially those that have been disproportionately affected by the pandemic.

Selkirk Copper Mines — sponsored Sponsored · Selkirk Copper Mines

In the meantime, the BoC also revised its growth forecast for the third quarter to an annualized 47.5%, with stronger full-year growth by the end of the year. However, the economy will still suffer from permanent scarring as a result of the pandemic, which in turn will hinder the rate of further potential growth by 0.8% between 2020 and 2023. The BoC brought attention to the steep contraction of the labour market and permanent job losses as the cause behind the long-term negative effects on the economy’s expansion.

Moreover, the long-term scarring effects will also be evident due to subdued business investment and a reduction in the labour force participation rate. Much of this will stem from interruptions to immigration, in addition to a decrease in the employment rate as a result of an aging Canadian population. Indeed, these factors will ultimately create a downward effect on labour productivity, which will limit growth in the domestic economy.


Information for this briefing was found via the Bank of Canada. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

Red Cloud Fall Mining Showcase 2026 | Day 2

More Gold Without a Bigger Upfront Bill? | Keith Boyle – New Found Gold

The Red Cloud Fall Mining Showcase 2026 | Day 1

Recommended

First Majestic Hits 4.24 g/t Gold Over 48.8 Metres at Saval as Jerritt Canyon Restart Advances

First Majestic Lifts Q3 Revenue 38% to US$394.1 Million on Higher Silver Prices

Related News

Bank of Canada Warns Tariffs Would Slash Growth, Push Inflation Higher

Bank of Canada Governor Tiff Macklem warned on Friday that proposed US tariffs would permanently...

Tuesday, February 25, 2025, 02:51:00 PM

People ‘Need a Break’: Doug Ford Calls for Interest Rate Cuts

A day before the Bank of Canada is set to announce interest rates, Ontario Premier...

Wednesday, March 6, 2024, 07:03:00 AM

Bank of Canada Calls for More Competition in Financial Sector

A top Bank of Canada official last week called for increased competition in the country’s...

Wednesday, October 15, 2025, 07:37:00 AM

Canadian Business Outlook Clouded by Trade Tensions, Bank of Canada Survey Finds

Two-thirds of Canadian businesses expect their costs to rise and most would increase selling prices...

Thursday, April 10, 2025, 02:54:00 PM

Bank of Canada Maintains Target Rate At 5.00% At April Meeting

The Bank of Canada has maintained its target for the overnight rate at 5%. Despite...

Wednesday, April 10, 2024, 09:55:25 AM