Saturday, September 13, 2025

Latest

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.

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

Marimaca Copper: The MOD Feasibility Study

Avino Q2 Earnings: Steady As She Goes

MEG Energy: Cenovus Comes In With $7.9 BILLION Offer

Recommended

Northern Superior Expands Philibert With 350 Metre Step Out Testing 1.10 g/t Gold Over 25.5 Metres

Goliath Resources Hits 18.58 g/t Gold Over 5.00 Metres At Surebet

Related News

Tiff Macklem: Bank of Canada ‘Getting Closer’ to Hiking Rates as Economic Conditions Improve

Bank of Canada Governor Tiff Macklem once again reassured Canadians that the central bank is...

Monday, November 15, 2021, 04:44:00 PM

Bank of Canada Maintains Policy Rate But Expects Inflation to Persist in 2022

What comes as likely not a surprise to many, the Bank of Canada once again...

Wednesday, December 8, 2021, 02:53:00 PM

More Rate Hikes? Canada’s Unemployment Rate Remains Historically Low

Canada’s labour market remained resilient last month, blowing past economists’ expectations and cementing the case...

Sunday, January 8, 2023, 02:16:00 PM

Tiff Macklem Leaves Rates Untouched, Is Confident Inflation Will Fall ‘Quickly’ In Coming Months

As was widely expected, Bank of Canada Governor Tiff Macklem opted to keep the overnight...

Wednesday, April 12, 2023, 10:23:20 AM

Bank Of Canada To Purchase Provincial, Corporate Bonds

The Bank of Canada maintained its overnight target rate of 0.25% this morning in its...

Wednesday, April 15, 2020, 10:55:36 AM