Fed maintains rate but to end QE and raise rate 'soon'

      The U.S. Federal Reserve left its key interest rate unchanged but said "with inflation well above 2 percent and a strong labor market, the Committee (the Fed's policy-making body) expects it will soon be appropriate to raise the target range for the federal funds rate," a message financial markets expected.
      The Federal Open Market Committee (FOMC) also said it had decided to "reduce the monthly pace of its net asset purchases, bringing them an an end in early March," with a reduction in the size of its balance sheet to begin after the benchmark federal funds rate has been raised.
      The Fed kept its target for the federal funds at 0.0 to 0.25 percent, unchanged since March 2020 when the rate was lowered twice in a single month by a total of 1.50 percentage points.

      Today's statement continues the Fed's pivot toward monetary tightening after the policy stance was kept ultra easy for five quarters while economic activity gradually recovered from the devastating hit from the COVID-19 pandemic and inflation rose.

       In November 2021 the Fed finally joined the global trend toward monetary tightening - central banks raised rates 124 times last year to combat rising inflation - and trimmed its monthly purchases of Treasury securities and mortgage-backed securities.

      In December last year the Fed then sped up the pace of monetary tightening further by trimming asset purchases even more and dropped its description of inflation as "transitory" as it raised its forecast for inflation and projected three rate hikes of 25 basis points each in 2022 and another three in 2023.

      With inflation continuing to rise - headline inflation hit 7 percent in December, the highest since June 1982 from 6.8 percent - Fed Chairman Jerome Powell this month kept up his hawkish message, describing inflation as a "severe threat" to a Senate hearing on Jan. 11, boosting market expectations the Fed may even raise rates four times this year.

      Today marks another critical step forward in the normalization of global monetary policy and follows on the heels of the Bank of Canada's message earlier today that interest rates need to be raised.

      As in December, the Fed said economic activity and employment have continued to improve though there are still risks to the outlook from new variants of the virus, such as the Omicron variant.

     However, the Fed also acknowledged inflation is "well above" its 2 percent target and the labor market was strong, the two conditions it had laid out in order to tighten monetary policy.

      To wrap up its asset purchases - known as Quantitative Easing (QE) and used as an addition tool to ease policy -  the Fed said it would purchase at least $20 billion of Treasury securities at least $10 billion of agency mortgage-backed securities in February to continue to smooth market functioning and support the flow of credit.

     However, next month will be the final month of asset purchases that will end in early March.

     The Fed said a reduction of its balance sheet - which contains some $8.8 trillion of bonds and securities - "will commence after the process of increasing the target range for the federal funds rate has begun."

Canada maintains rate but says rates need to rise

      Canada's central bank left its key interest rates steady but took another major step forward toward normalizing its monetary policy and raising interest rates rate by dropping its previous guidance that the economy still needs considerable monetary policy support and policy rates would be kept unchanged.

     The Bank of Canada (BOC) left its benchmark target for the overnight rate at the effective lower bound of 0.25 percent, unchanged since it was cut three times in March 2020 at the height of the COVID-19 pandemic.
     BOC also left its bank rate at 0.50 percent and the deposit rate at 0.25 percent.
     "With overall economic slack now absorbed, the Bank has removed its exceptional forward guidance on its policy interest rate," BOC said, paving the way for interest rate hikes as soon as its next meeting in March.

     At the press conference, BOC Governor Tiff Macklem added the emergency monetary measures that helped support the economy during the pandemic were no longer needed and interest rates will need to rise to control inflation.

    "Second, we want to clearly signal that we expect interest rates will need to increase," Macklem said, adding inflation will come down as the pandemic fades and conditions normalize.

     BOC said it was still in a phase of reinvesting in government bonds by keeping its overall holdings roughly constant, at least until it begins to raise the policy interest rate.

      At that point BOC - which in April last year began reducing its weekly bond purchases and then ended them in October - said it will consider "reducing the size of its balance sheet by allowing roll-off of maturing Government of Canada bonds."
      In recent years central banks have adopted forward guidance as a monetary tool to affect expectations and prices in financial markets, and BOC at its last policy meeting in December reiterated the economy still required considerable support and interest rates would be held at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is achieved.

     Since then it has become clear Canada's economy performed better than expected in the second half of last year and inflation is now at highs not seen for 30 years.

     "While COVID-19 continues to affect economic activity unevenly across sectors, the Governing Council judges that overall slack in the economy is absorbed, thus satisfying the conditions outlined in the Bank's forward guidance on its policy interest rate," BOC said, adding:

     "The Governing Council therefore decided to end its extraordinary commitment to hold its policy rate at the effective lower bound."

     The timing and pace of future rate increases will now be guided by the bank's commitment to achieving the 2.0 percent inflation target, within a range of 1-3 percent.

     BOC's step-by-step tightening of its monetary policy stance since April last year takes place against a backdrop of estimated growth of 4.5 percent in 2021 and the economy entered 2022 with considerable momentum, such as strong employment growth and a tightening labour market, that shows economic slack is absorbed.

     Although the Omicron variant of COVID-19 is weighing on economic activity, BOC said its impact is expected to be less severe and economic growth is expected to bounce back and remain robust, helped by consumer spending on services, exports and investment.

     BOC forecast economic growth in 2022 of 4.0 percent in its latest monetary policy report, down from 4.3 percent previously forecast, and about 3.5 percent in 2023, down from an earlier 3.7 percent.

     Inflation has remained above the upper limit of BOC's target range since April last year and rose to 4.8 percent in December, the highest since September 1991, and BOC expects inflation to remain close to 5 percent in the first half of this year due to persistent supply constraints and higher food and energy prices.

     But as these supply shortages ease, inflation is expected to decline to about 3 percent by the end of this year and gradually ease toward the target.

    "The Bank will use its monetary policy tools to ensure that higher near-term inflation expectations do not become embedded in ongoing inflation," BOC said.

     BOC raised its forecast for 2022 headline inflation to 4.2 percent from an earlier 3.4 percent while the 2023 forecast was unchanged at 2.3 percent.

Trifecta of Latam cenbanks raise rates to curb inflation

     A trifecta of Latin American central banks - Mexico, Peru and Uruguay - raised their benchmark interest rates further to drive down inflation expectations that are continuing to rise amid inflation rates that are well in excess of the central banks' target.

     The Bank of Mexico (Banxico) raised its rate by another 25 basis points to 5.0 percent, its fourth rate hike this year, and has now raised the rate a net 75 points this year following earlier rate hikes in June, August and September.
     The Central Bank of Uruguay (CBU) raised its monetary policy rate by 50 basis points to 5.75 percent, its third hike this year, and has now raised it 1.25 percentage points this year following earlier hikes in August and October.
     The Central Reserve Bank of Peru (BCRP) raised its reference rate by 50 basis points to 2.0 percent, its fourth hike this year, and has now raised it 1.75 percentage points following earlier hikes in August, September and October.
     Today's three rate hikes boosts the number of rate hikes worldwide this year to 88, more than six times the number of rate cuts, with 39 of those cuts by emerging market central banks.
      As most central banks, Banco de Mexico considers the forces boosting inflation to be transitory but it also said the time horizon of this process is unknown and is affecting a wide range of products, while price increases are of a "considerable magnitude."
     "This poses greater risks to the price formation process and to inflation expectations," Banxico said, adding this was the main reason for continuing to reinforce its monetary policy stance to ensure inflation converges to its 3.0 percent target.
      Mexico's inflation rate rose to 6.24 percent in October from 6.0 percent in September and the central bank said inflation expectations for the next 12 months and for 2022 rose again while longer-term expectations remain stable at levels that exceed its target.
     Banxico raised its forecast for headline inflation in the fourth quarter of this year to 6.8 percent from September's forecast of 6.2 percent but lowered the forecast for inflation in the fourth quarter of 2022 to 3.3 percent from 3.4 percent.
     By the third quarter of 2023 Mexico's inflation rate is seen easing further to 3.1 percent.

     Uruguay's central bank said its monetary policy committee considers it necessary to consolidate the process of reducing inflation expectations during the current economic recovery and the gradual process of exiting from a expansionary monetary policy phase is expected to continue in upcoming policy decisions.
     Uruguay's inflation rate rose to 7.89 percent in October from 7.41 percent in September.

     CBU reiterated that as long as there are no setbacks in public health, the priority of monetary policy is to drive inflation expectations to the center of its target range of 3.0 to 6.0 percent over the next 2 years.

     Peru's central bank reiterated its statement from October that the monetary policy stance remains expansionary and today's rate hike does not necessary imply a cycle of successive rate hikes.

     Peru's inflation rate rose to 5.83 percent from 5.23 percent in September but BCRP said it expects inflation to return to its target range of 2.0 percent, plus/minus 1 percentage point, in the second half of next year as the impact of transitory factors on inflation, such as the exchange rate, fuel and grain prices, reverse and economic activity remains below its potential level.

     But the bank also said inflation expectations were slightly above the upper limit of the target range at 3.3 percent for 2022 and its board said it was attentive to new information about inflation expectations and economic activity and will consider changes to its monetary policy stance if necessary.

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Canada holds rate but ends QE as economy improves

     Canada's central bank left its key interest rate steady, as expected, but surprised financial markets by ending quantitative easing (QE) - one of the monetary tools used to provide extraordinary stimulus during the COVID-19 pandemic - due to progress made in the economic recovery.
     The Bank of Canada (BOC) left its target for the overnight rate at the effective lower bound of 0.25 percent, unchanged since it was cut three times in March 2020 at the height of the pandemic.
      In addition to last year's rate cuts, which totaled 1.50 percentage points, BOC also embarked on asset purchases of government bonds and commercial paper - known as quantitative easing (QE) - to keep longer-term interest rates low and financial markets operating smoothly.
      At first BOC bought C$5 billion of government securities a week and later expanded these purchases to include bonds from Canada's provinces and corporate bonds.
      In October last year BOC shifted its purchases toward longer-term bonds and lowered the weekly amount to $4 billion.
      But in April this year BOC became the first developed market central bank to begin rolling back the extraordinary stimulus provided last year and cut the weekly purchases to $3 billion. In July the weekly purchase amount was lowered further to $2 billion as the economy slowly recovered.

      Today BOC took another major step toward normalizing its monetary policy but said it still views the economy as requiring "considerable monetary policy support" in light of the continued excess capacity in the economy.

     "In light of the progress made in the economic recovery, the Governing Council has decided to end quantitative easing and keep its overall holdings of Government of Canada bonds roughly constant," the bank's monetary policy committee said today.

      As bonds mature at different times, BOC will move to a monthly rather than a weekly target for bond purchases and set the purchase range at $4 billion to $5 billion a month. This includes $1 -$2 billion of bonds in the primary market and about $2.5 billion to $3.5 billion in the secondary market.

      BOC described this shift to maintaining its holdings of bonds rather than expanding them as a "reinvestment phase," and said the length of this phase was part of the monetary policy decisions that are based on the strength of the economy and inflation.

     "But as I indicated in September, it is reasonable to expect that we will be there for a period of time, at least until we raise our policy interest rate," BOC Governor Tiff Macklem said about the bond holdings.

      BOC also reiterated its forward guidance, saying it remains committed to keeping its policy rate at the current level until the economic slack is absorbed so the 2 percent inflation target is achieved.

      The central bank expects this to happen in the middle of next year.

      In an update to its monetary policy report, BOC lowered its forecast for economic growth this year to 5.1 percent from 6.0 percent and the 2022 forecast to 4.3 percent from 4.6 percent. Last year Canada's economy shrank 5.3 percent.

     The forecast for inflation this year was raised to 3.4 percent from 3.0 percent and the 2022 forecast to 3.4 percent form 2.4 percent. In 2020 inflation averaged 0.7 percent.

Canada holds rate but trims asset purchases 2nd time

     Canada's central bank kept its key interest rate steady, as widely expected, but scaled back its asset purchases for the second time, saying this "reflects continued progress towards recovery and the Bank's increased confidence in the strength of the Canadian outlook."
     The Bank of Canada (BOC) left its target for the overnight rate at 0.25 percent, unchanged it was cut three times in March last year to what the bank considers the lower bound.

     In addition to the aggressive rate cuts - the rate was cut 1.50 percentage points - BOC also embarked on asset purchases, known as quantitative easing, of government bonds and commercial paper to keep longer-term interest rates low and keep financial markets operating smoothly.

     Initially BOC began buying C$5 billion of government securities a week and later expanded these purchases to include bonds from Canada's provinces and corporate bonds.

     But in October last year BOC shifted its weekly purchases toward longer-term bonds that had a more direct impact on borrowing costs and lowered the weekly amount to $4 billion.

     In April this year BOC became the first developed market central bank to begin the process of rolling back the extraordinary stimulus provided during the COVID-19 pandemic and cut the weekly purchase amount to $3 billion.

     Today, BOC trimmed its purchases further to $2 billion a week - the same day New Zealand's central bank decided to wrap up its asset purchases completely - and said further changes in the pace of bond purchases would depend on the strength and durability of the economic recovery.

     And while BOC raised its forecast for inflation this year and 2022, it lowered its forecast for growth this year as the third wave of the virus slowed growth in the second quarter.

     "The Governing Council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support," BOC said, confirming that it still expects to keep its policy interest rate at the current level until economic slack is absorbed so it sustainably reaches its 2.0 percent inflation target.

     As in April, when it last issued its economic forecast, it expects this to happen in the second half of 2022.

      In an update to its forecast, BOC sees gross domestic product growing 6.0 percent this year, down from the previous forecast of 6.5 percent, but then expanding by 4.6 percent in 2022, up from 3.7 percent previously forecast.

      Inflation in Canada has risen sharply in recent months and BOC now expects it to remain above 3.0 percent through the second half of this year before declining toward its 2.0 percent target in 2022 as short-run imbalances and economic slack pulls it lower.

     "The factors pushing up inflation are transitory, but their persistence and magnitude are uncertain and will be monitored closely," BOC said.

     Consumer price inflation rose to 3.6 percent in May from 3.4 percent in April and BOC expects the rate to average 3.0 percent this year, up from the previous forecast of 2.3 percent and 0.7 percent last year.

     In 2022 inflation is seen averaging 2.4 percent, up from 1.9 percent, and then 2.2 percent in 2023.

     The Canadian dollar, known as the loonie, has strengthened against the U.S. dollar since March last year through May this year but since the U.S. Federal Reserve's hawkish tilt in mid-June, it has lost ground, like most other currencies.

     Today, however, the loonie rose in response to BOC's tightening, with the loonie trading at 1.248 to the U.S. dollar to be up 2.2 percent since the start of this year.

Mexico joins other EM central banks and raises rate

      Mexico's central bank surprised economists by joining the growing number of emerging market central banks that are tightening monetary policy in the face accelerating inflation by raising its key interest rate, adding the next rate move would depend on the expected trajectory of inflation and inflation expectations.
     The Bank of Mexico (Banxico) raised its target for the overnight interbank interest rate by 25 basis points to 4.25 percent, returning the rate to the level it was from September last year until February this year when the rate was cut for the 12th time to boost economic activity and inflation.

      In March and May Banxico's board adopted a data-dependent approach to monetary policy as economic activity remained sluggish amid the COVID-19 pandemic, rendering the outlook for inflation uncertain.

      But with the number of vaccines increasing, demand is slowly recovering while global energy and commodity prices have soared, boosting inflation in Mexico to above Banxico's 3.0 percent target.

      Nevertheless, after Mexico's inflation rate eased in May to 5.89 percent from 6.08 percent in April, economists dialed back expectations for Mexico to follow other emerging market central banks, such as Brazil and Russia that have already raised rates three times this year.

      Illustrating the surprise to financial markets from Banxico's rate hike, Mexico's peso shot up almost 1 percent to 19.79 to the U.S. dollar to be 0.5 percent higher on the year.

      After an unprecedented loosening of monetary and fiscal policy last year to cushion economies from the COVID-19 pandemic, central banks are slowly tightening.

      Mexico becomes the 17th central bank to raise its interest rates this year and the 3rd emerging market central bank this week alone, following in the footsteps of the Czech Republic and Hungary.

      Banxico's governing board only narrowly approved the rate hike, with two of its five members voting to maintain the rate.

      Although Banxico still expects the shocks that have pushed up inflation - such as higher commodity prices, base effects, supply bottlenecks - to be of a "transitory nature," it realizes they may still pose a risk to prices due to the magnitude, variety and extended time frame of these shocks.

     "In this context, it was deemed necessary to strengthen the monetary policy stance in order to avoid adverse effects on inflation expectations, attain an orderly adjustment of relative prices, and enable the convergence of inflation to the 3% target," the bank said.

      Banxico added inflation in coming quarters was seen above forecasts in its last quarterly report and headline inflation was now first seen converging to its 3.0 percent target in the third quarter of 2022 instead of in the second quarter.

     "The Mexican economy recovered notably in March and moderately in April," the bank said, adding it is expected to continue recovering the rest of the year.

      Looking to the U.S., Banxico said the rise in U.S. inflation to 5 percent in May was "noteworthy," and while central banks in advanced economies have left their stimulus unchanged, "it is foreseen that these could be maintained for a shorter period."

     While the Federal Reserve's change in its outlook for interest rates last week triggered a rise in global bond yields and the U.S. dollar, markets have stabilized this week but Banxico said there are still risks that higher levels of inflation could hasten the withdrawal of monetary stimulus.

Canada keeps rate but trims QE as outlook improves

     Canada's central bank left it key interest rate steady for the 9th time but will scale back its asset purchases, as signaled last month, as it becomes the first developed market central bank to roll back the extraordinary level of monetary stimulus in response to the global economic recovery from the COVID-19 pandemic.

     The Bank of Canada (BOC) kept its target for the overnight rate at 0.25 percent, unchanged since March 27, 2020 when it was cut for the third time that month to what the bank considers the effective lower bound.

     It also left the bank rate at 0.50 percent and the deposit rate at 0.25 percent.

     "The outlook has improved for both the global and Canadian economies," BOC said, adding economic activity has proved more resilient than expected in the face of the pandemic and the rollout of vaccines.

     In addition to trimming its weekly purchases of government bonds to $3 billion from $4 billion, BOC raised its forecast for economic growth and inflation, and pulled forward its date for when it may raise its interest rate.

     "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," BOC said, reiterating its previous guidance, but then adding:

     "Based on the Bank's latest projection, this is now expected to happen some time in the second half of 2022," a change from the January projection that saw this happening in 2023.

     BOC was very aggressive in easing its monetary policy stance last year in response to the pandemic.

     The bank not only slashed its key interest rate three times in the month of March by a total of 150 basis points to what it saw as the effective lower bound of 0.25 percent, but also embarked on asset purchases of both commercial paper and government bonds to ensure financial markets continued to operate.

     Initially, BOC began buying C$5 billion of government securities a week and then in the following month of April last year the bank expanded the program to include up to $50 billion of bonds from the country's provinces and up to $10 billion in corporate bonds.

     In October last year BOC's weekly bond purchases were trimmed to $4 billion as part of a shift toward buying more longer-term bonds that have a more direct impact on borrowing rates.
    The result of last year's asset purchases and repurchase operations was BOC's balance sheet ballooned four times its pre-pandemic size to about $575 billion in February.

     But in a key speech last month by BOC Deputy Governor Toni Gravelle about the bank's move to discontinue some of its crises programs - foreshadowing today's move - he said some of the shorter-term debt bought by the bank had already matured and by the end of April the balance sheet will have shrunk to about $475 billion.

     Although Canada has weathered the economic storm from the pandemic better than expected, the bank said a number of regions were experiencing a third wave of infections and lockdowns, injecting a new dimension of uncertainty, and the recovery remains highly dependent on the virus and vaccinations.

    "Even as economic prospects improve, the Governing Council judges that there is still considerable excess capacity, and the recovery continues to require extraordinary monetary policy support," BOC said.

    Decisions about further changes to the bank's purchases of assets - known as quantitative easing (QE) - will be guided by how the recovery proceeds and the bank said it would continue with QE to keep interest rates low across the yield curve and to provide "the appropriate degree of monetary stimulus to support the recovery and achieve the inflation objective."

     After shrinking in the first and second quarters of 2020, Canada's economy has bounced back, with gross domestic product growing 8.9 percent in the third quarter from the second quarter and then 2.3 percent in the fourth quarter of last year for an annual contraction of 3.2 percent, up from 5.3 percent in the third quarter and 12.7 percent in the second quarter of 2020.

      Growth in the first quarter of this year appears "considerably stronger" than the bank forecast in January and it now expects slack in the economy to be absorbed and inflation to sustainably return to its target of 2.0 percent, within a control range of 1-3 percent, in the second half of 2022.

     BOC raised its forecast for growth this year to 6.5 percent, up from January's forecast of 4 percent and a 2.5 percent contraction in 2020. 

     For 2022 the economy is seen expanding around 3.75 percent, down from its earlier forecast of 5 percent, and then 3.25 percent in 2023, up from 2.5 percent.

     Earlier today there was further proof of Canada's recovery from the pandemic, with Statistics Canada saying the annual inflation rate rose to 2.2 percent from 1.1 percent in February, continuing the steady rise since June 2020 when consumer prices rose after deflation set in during April and May.

    Over the next few months, inflation is expected to rise temporarily to the top of the bank's control range, mainly due to base effects, but then return to 2 percent in the second half of next year.

     Inflation is forecast to rise to 2.2 percent in the fourth quarter of this year, up from January's forecast of 1.5 percent but down from 2.9 percent in the second quarter, and then ease to 2.0 percent a year later before rising to 2.4 percent in the fourth quarter of 2023, up from 2.1 percent.
     Canada's labor market has been strengthening faster than expected, with the economy in March adding three times the number of jobs as expected, pushing down the unemployment rate to 7.5 percent that month from 8.2 percent in February and down from a pandemic high of 13.7 percent in May 2020.

     BOC also revised upward its estimate of the country's potential output due to the country's greater resilience to the pandemic and accelerated digitalization though it remains 1 percent below pre-pandemic estimates.

     Global potential output is forecast to recovery to 3.0 percent in 2022 and 2023, up from 2.7 percent this yea and 2.3 percent in 2020 as the impact of the pandemic fades, and Canada's potential output is forecast to rebound to 1.6 percent in 2022 from an earlier forecast of 1.5 percent - including the temporary effects of the pandemic - and 2.0 percent in 2023.

     The yield on Canada's benchmark 10-year government bond has also recovered steadily since hitting a low of around 0.40 percent in August last year to trade around 1.5 percent in the last month.

     The Canadian dollar reacted strongly to the BOC's move, jumping some 1.3 percent to 1.248 to the U.S. dollar, continuing its steady rise since almost hitting records low of 1.45 against the U.S. dollar in March last year to be up over 2 percent this year.

Canada holds rate, QE, and gains confidence in recovery

     Canada's central bank left unchanged its key interest rate, forward guidance and asset purchases, as expected, adding it was "continuing to gain confidence in the strength of the recovery" and would adjust the pace of purchases of government bonds as required while continuing  to provide the "appropriate" degree of monetary stimulus to support the recovery and inflation objective.

     The Bank of Canada (BOC) maintained its target for the overnight interest rate at what it has described as "the effective lower bound" of 0.25 percent along with the bank rate at 0.50 percent and the deposit rate at 0.25 percent.
     BOC also maintained its current pace of asset purchases under its quantitative easing program (QE) at $4 billion a week, unchanged since October last year when it trimmed the weekly amount of purchases from $5 billion as part of a shift toward purchasing longer-term bonds that more directly impact the borrowing rates that affect households and businesses to keep the actual monetary stimulus steady.

     BOC's key rate has been unchanged since it was slashed three times in rapid succession in March last year, at the height of the COVID-19 pandemic crises, when it also began the asset purchases.

     "While economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support," BOC said as it seeks to balance a faster-than-expected economic recovery against considerable economic slack and uncertainty over the path of the virus.

    As in most countries around the world, growth in Canada has been stronger in recent months than expected and as the pace of the global recovery picks up speed, financial markets are starting to price in faster growth and a less accommodative policy stance by central banks.

     Canada's central bank is among those are expected to trim their stimulus in coming months and while BOC was careful not show its hand today, it acknowledged that economic growth in the first quarter of 2021 is now expected to be positive rather than negative, as projected in January, and the near-term economic outlook is stronger.

     Analysts had widely expected the BOC in its statement today to maintain its stance and commitment to keeping its key rate at the current level until the 2 percent inflation target is achieved, which is pencilled in for 2023.

     Instead, they expect the first shift in tone to come in April when BOC updates its economic forecasts to reflect the higher-than expected 9.6 percent jump in gross domestic product in the fourth quarter of 2020 due to a more resilient economic performance than expected in response to the second virus wave.

     In January BOC forecast growth of 4 percent in 2021 after a decline of 5.4 percent in the full 2020 year, and then growth of almost 5 percent in 2022 and around 2.5 percent in 2023.

     This week the OECD revised upwards its economic forecast sharply, including that for Canada, and projects 4.7 percent growth in Canada this year, up from a December forecast of 3.5 percent, and projects 4.0 percent growth in 2022.

Mexico cuts key rate as inflation seen easing in H2

     Mexico's central bank returned to the path of monetary easing, as expected, saying the latest economic data shows it has room to cut its key interest rate while maintaining the forecast for inflation to move toward its target of 3.0 percent.

     The Bank of Mexico (Banxico) cut its target for the overnight interbank interest rate by 25 basis points to 4.0 percent in its first rate cut since September last year after which it paused after seven rate cuts times starting in February in response to the outbreak of the COVID-19 pandemic.

     Since August 20129, when Banxico began unwinding 500-basis points of rate hikes in the three years from December 2015 to December 2018, the rate has been now cut by 425 points. 

     Looking ahead, the central bank said monetary policy will depend on the evolution of those factors that impact headline and core inflation.

     Mexico's inflation rate rose to 3.54 percent in January this year from a 7-month low of 3.15 percent in December but the central bank said the pandemic has had a significant impact on prices, putting upward pressure on merchandise inflation and downward pressure on service inflation.

     Inflation is expected to rise further in the second quarter due to the comparison with the fall in energy prices last year but then begin to decline in the second half of the year, the bank added.

     "Headline inflation expectations for the end of 2021 were adjusted slightly upwards and those for the medium and long term remain stable at levels above the 3% target," the central bank said.

     Mexico's economy shrank 8.8 percent in 2020 with gross domestic product in the fourth quarter of last shrinking by an annual 4.5 percent compared with a decline of 8.6 percent in the third quarter and a 18.7 percent contraction in the second quarter.

Canada holds rate, trims QE and to focus on long bonds

     Canada's central bank left its benchmark interest rate steady but will reduce its purchases of bonds and focus on buying more longer-term bonds so the net effect is there is no reduction in the level of monetary stimulus, which it confirmed will continue until the economic recovery is well underway.

     The Bank of Canada (BOC) left its target for the overnight rate at the effective lower bound of 0.25 percent, unchanged since it was slashed three times in March by a total of 150 basis points to what it considers the "effective lower bound."

      Along with the rate cuts, BOC in March also began buying C$5 billion of government securities a week in the secondary market across a wide range of maturities.

      Today the bank's council said it would gradually reduce these purchases to $4 billion a week and recalibrate its quantitative easing (QE) program toward longer-term bonds that have a more direct influence on the borrowing rates that a most important for households and businesses.

     "The Governing Council judges that, with these combined adjustments, the QE program is providing at least as much monetary stimulus as before," BOC said, reiterating its guidance that it will keep the policy rate at the effective lower bound until the 2.0 percent inflation target is reached.

     The decision comes against a backdrop of an upward revision of the bank's growth forecast for this year to a contraction of 5.7 percent compared with an earlier forecast of a 7.8 percent decline due to a stronger-than-expected rebound in the summer.

      But growth in the fourth quarter is expected to slow markedly due to rising COVID-19 cases as the economy's transition to what BOC said was a "more moderate recuperation phase," with growth continuing to rely heavily on policy support.

     BOC lowered its 2021 growth forecast to 4.2 percent from 5.1 percent but maintained the 2022 forecast for growth of 3.7 percent. But in light of the long-lasting effects of the pandemic, the estimate for Canada's potential growth rate was revised down.

     Canada's inflation rate rose to 0.5 percent in September from 0.1 percent in the previous two months but is expected to remain below the bank's target range of 1.0 to 3.0 percent until early 2021, mainly due to lower energy prices.

      BOC forecast headline inflation of an unchanged 0.6 percent this year, 1.0 percent in 2021 and 1.7 percent in 2022, below 2019's 1.9 percent.

Canada holds rate, will provide more stimulus if needed

      Canada's central bank left its key interest rates steady at what it describes as the effective lower bound and will continue purchasing Canadian government bonds of at least $5 billion a week, adding the economy will continue to require extraordinary monetary policy support as its moves from "reopening to recuperation."
     The Bank of Canada (BOC) kept its target for the overnight rate at 0.25 percent, as widely expected, after cutting it three times in March by a total of 150 basis points. The bank rate was also left at 0.50 percent and the deposit rate at 0.25 percent.
     Under the first governing council meeting chaired by Governor Tiff Macklem, who replaced retiring Stephen Poloz last month, BOC said the policy interest rate would be kept at the effective lower bound until economic slack is absorbed so the 2.0 percent inflation target is achieved.
      "To support the recovery and achieve the inflation objective, the Bank is prepared to provide further monetary stimulus as needed," BOC said in a more specifically dovish guidance than in June when it merely said any further policy actions would be calibrated to provide the necessary degree of policy accommodation to achieve the inflation target.
      BOC said its support of financial markets since March, such as term repo operations, are having their intended effects of reducing market strains while the purchases of provincial and corporate bonds will continue and it "stands ready to adjust its programs if market conditions warrant."
      In an update to its economic forecast that included a central scenario based on no second wave of the Covid-19 virus rather than the normal base-case projections, BOC estimated economic activity in the second quarter of this year was 15 percent below the second quarter of 2019, the steepest decline since the Great Depression but still less severe than in its worst scenarios envisaged in April.
     "There are early signs that the reopening of businesses and pent-up demand are leading to an initial bounce-back in employment and output," BOC said, adding decisive fiscal and monetary policy actions have supported incomes and helped lay the foundations for a recovery.
     Some 40 percent of the economic collapse in the first half of the year is expected to be made up in the third quarter but the economy's recuperation will then slow as the pandemic continues to affect consumer confidence and behavior, and as the structure of the economy adjusts.
     Canada's economy is seen contracting by 7.8 percent this year, down from 2019 growth of 1.7 percent, and then expanding 5.1 percent in 2021 and 3.7 percent in 2022.
     However,  economic slack will persist and inflation is seen averaging 0.6 percent this year, down from 1.9 percent last year, and then slowly rise to 1.2 percent in 2021 and 1.7 percent in 2022.
     Canada's inflation rate has dropped in recent months, with consumer prices down an annual 0.4 percent in May following a 0.2 percent fall in April, well below its 2.0 percent target.

     After plunging in March against the safe-haven bought U.S. dollar, the Canadian dollar rebounded through early June. But since then it has largely been moving sideways and was trading around 1.35 to the U.S. dollar today, down 3.7 percent since the start of this year.

Mexico cuts rate 5th time as risks remain to downside

     Mexico's central bank cut its benchmark interest rate for the fifth time this year, saying the risks to the economy remain to the downside and there is persistent uncertainty about the economic recovery after a considerable impact from the Covid-19 pandemic.
     The Bank of Mexico, known as Banxico, cut its target for the overnight interbank interest rate by another 50 basis points to 7.0 percent and has now cut it 225 points this year following cuts in February, March, April and May.
     It is also Banxico's 9th rate cut since August 2019 when it began to unwind some of rate hikes - a total of 500-basis-points - between December 2015 and December 2018. Since August last year the rate has been cut 325 points.
     The bank's board said its decision today was unanimous and future actions will be based on the impact on economic activity from the Covid-19 pandemic and the evolution of the financial shock so the policy rate is consistent with inflation around Banxico's target.
     Mexico's economy has contracted in the last four quarters, with gross domestic product in the first quarter down 1.2 percent from the previous quarter.
     In late May Banxico forecast the economy would contract as much as 8.8 percent this year.
     Banxico said the reopening of parts of the economy in May and June will lead to some recovery though the impact of the pandemic have been "considerable and uncertainty persists" and growth risks remain significantly biased to the downside.
     Mexico's inflation rate rose to 2.84 percent in May and 3.17 percent in the first half of June from 2.15 percent in April and the central bank said expectations are for inflation to remain above its 3.0 percent goal.

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US Fed holds rate, economy seen shrinking 6.5% in '20

     The Federal Reserve left its policy rate steady at essentially zero as it forecast an economic contraction this year while it repeated its guidance from April that it "expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goal."
     The central bank for the United States kept its target range for the federal funds rate at 0.0 to 0.25 percent, unchanged since two rapid-fire rate cuts totaling 150 basis points in early March.
     As in its previous policy statement in April, the Fed said the coronavirus will weigh heavily on economic activity, employment and inflation in the near term, and "poses considerable risks to the economic outlook over the medium term."
     In the first update to its economic projection since December last year, before the Covid-19 pandemic led to a shutdown of the global economy, the Fed slashed its growth forecast for this year to a contraction of 6.5 percent, down from an earlier forecast for growth of 2.0 percent.
     Next year the U.S. economy is seen bouncing back, with growth of 5.0 percent and then 3.5 percent in 2022.
      Reflecting the hit to economic growth and lower inflation, the Fed projected the fed funds rate would remain at its current level of 0.1 percent through 2022 as inflation remains below its target in the same period while unemployment only slowly declines.
     The normal update to the Fed's economic projections in March was skipped amid the uncertainty surrounding the impact of the coronavirus on the economy.
     The sudden halt to global economic activity to curb the spread of the virus not only triggered the rate cuts in March, but also a pledge by the Fed of unlimited amount of government bonds purchases, the launch of a flurry of new funding facilities and the injection of trillions of dollars into financial markets to ensure they operated smoothly.
      "To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions," the Fed's policy-making body, the Federal Open Market Committee (FOMC) said in a unanimous statement.
    Among the lending facilities the Fed launched in March were the Commercial Paper Funding Facility (CPFF), the Primary Market Corporate Credit Facility (PMCCF), the Secondary Market Corporate Credit Facility (SMCCF),  the Term Asset-Backed Securities Loan Facility (TALF) and the Money Market Mutual Fund Liquidity Facility (MMLF).
      Internationally, the Fed was also busy ensuring the availability of U.S. dollars, establishing temporary U.S. dollar swap lines with a series of central banks abroad, such as the central bank of Brazil and Norway on top of its existing swap lines with the major central banks of the world, including Canada, the UK, the ECB, Switzerland and Japan.
     In April the Fed added to its loan facilities through the Paycheck Protection Program (PPP), the Main Street lending program and the Municipal Liquidity Facility (MLF) while the Fed in May announced it would begin buying exchange-traded funds (ETFs) that include U.S. corporate bonds.
    As other economies around the world, the U.S. economy has been hit hard by measures to curb the spread of the Covid-19 virus and this week the National Bureau of Economic Research, which tracks economic cycles in the U.S., declared the U.S. officially entered a recession in February, ending a 128-month expansion, the longest since records began in 1854.
     The OECD, the Paris-based international economic organization of developed economies, earlier today released its latest outlook for the global economy, saying the pandemic has triggered "the most severe economic recession in nearly a century," with the U.S. economy seen shrinking 7.3 percent this year even if a second wave of the virus is avoided and by 8.5 percent if a second wave takes hold.
      In the first quarter of this year, the U.S. gross domestic product contracted an annualized 5.0 percent in the first quarter from the previous quarter for annual growth of only 0.23 percent, down from 2.3 percent in the fourth quarter of last year.
     Inflation in the U.S. has decelerated sharply in recent months, reflecting the fall in crude oil prices and energy, with headline consumer prices up only 0.1 percent in May from last year, down from 0.3 percent in April, well below the Fed's target of 2.0 percent.
     The Fed forecast inflation, as measured by its favored personal consumption expenditure index, will average 1.0 percent this year, then 1.6 percent in 2021 and 1.7 percent in 2022 while the unemployment rate will average 9.3 percent this year, then 6.5 percent in 2021 and 5.5 percent in 2022.

Canada maintains rate as growth seen resuming in Q3

     Canada's central bank left its benchmark interest rate steady, as expected, and while it maintained its commitment to continuing large-scale asset purchase until a economic ecovery is under way, it also said strains in short-term funding markets had eased and the economy should resume growing in the third quarter of this year.
     The Bank of Canada (BOC) kept its target for the overnight rate at the effective lower bound of 0.25 percent after cutting it three times in March this year by a total of 1.50 percentage points.
     In contrast to its policy statement in April, when it said it was ready to adjust the scale and duration of its stimulus measures as necessary, BOC today signaled a more policy neutral stance, saying "any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target."
     BOC also voiced confidence Canada's economy had avoided the most severe scenarios envisaged in its April monetary policy report, which laid out a range of possible economic outcomes rather than a base case projection due to the uncertainty about the length and containment of the Cover-19 pandemic.
      "While the outlook for the second half of 2020 and beyond remains heavily clouded, the Bank expects the economy to resume growth in the third quarter," BOC said, noting gross domestic product in the first quarter shrank 2.1 percent from the previous quarter, in the middle of the range seen in April due to the combined impact of falling oil prices and widespread shutdowns.
     Economic output in the second quarter is likely to show a further decline of 10 to 20 percent as shutdowns and lower investment in the energy sector take a further toll on output, BOC said.
     Consumer price inflation in Canada has also tumbled, hitting minus 0.2 percent in April, and BOC expects temporary factors to keep inflation below its target range of 2.0 percent, plus/minus 1 percentage point, in the near term.
     It was the first drop in Canada's consumer prices since September 2009.
     After aggressive measures to ensure funding markets continued to function in March, BOC said strains had eased and it was reducing the frequency of its term repo operations to once a week and its program to purchase bankers' acceptances to bi-weekly.
      However, BOC said it was still ready to adjust these programs if market conditions warranted and it was continuing with its other programs of buying federal, provincial and corporate debt at their current frequency and scope.
     "As market function improves and containment restrictions ease, the Bank's focus will shift to supporting the resumption of growth in output and employment," BOC said.
     Today's decision by BOC's governing council marks a shift in leadership of the bank to Tiff Macklem from Stephen Poloz, who is retiring after 7 years.
     Macklem, who lost out to Poloz as governor in 2013, participated in today's meeting as an observer but the statement said he endorsed the decision and measures announced.

Mexico cuts rate 8th time, 4th rate cut this year

     Mexico's central bank lowered its benchmark interest rate for the fourth time this year, as expected, saying it had room to ease its monetary policy stance further in light of falling inflation and a considerable contraction of economic activity.
     The Bank of Mexico, known as Banxico, cut its target for the overnight interbank interest rate by another 50 basis points to 5.50 percent and has now cut it 175 basis points this year following cuts in February, March and April.
     Since August 2019, when Baxico began to unwind some of the 500-basis points hikes from December 2015 to December 2018, the rate has been cut eight times by 275 points.
     The bank's governing board was unanimous in its decision.
      Mexico's gross domestic product shrank another 1.6 percent in the first quarter from the previous quarter, the fifth quarter of contraction, and the central bank said the effects of the pandemic expected to intensify during the second quarter, resulting in a significant decline in employment.
     The slack in the economy is therefore continuing to widen while the balance of risks to growth remain biased to the downside.
      Mexico's inflation rate also fell in April to 2.15 percent from 3.25 percent in March as energy and gasoline prices fell, pushing down short-term inflation expectations.
      "The challenges for monetary policy posed by the pandemic include both the unprecedented impact on economic activity as well as those associated with the financial shock that we are currently facing," Banxico said.
       The downside risks to inflation come from a widening of the output gap and the impact of lower energy prices while a greater and more persistent depreciation of the peso and possible disruptions to production and distribution of certain goods pose upside risks, which means the balance of risks to inflation remain uncertain, the central bank said.

US Fed holds rate, says virus poses 'considerable risks'

    The U.S. Federal Reserve left its benchmark interest rate steady at 0.0 to 0.25 percent, as widely expected, but said the outbreak of the coronavirus is causing "tremendous human and economic hardship across the United States and around the world," and "poses considerable risks to the economic outlook over the medium term."
     At two emergency meetings within two weeks in March, U.S. central bank's policy-setting Federal Open Market Committee (FOMC), slashed its federal funds rate by 150 basis points and has cut its five times by a total of 2.25 percentage points since it began easing in July 2019.
     In addition, the Fed has launched a vast array of monetary tools to cushion U.S. households and businesses from the damage from the efforts to contain Covid-19.
     This includes buying Treasury securities, agency residential and commercial mortgage-backed securities to ensure its easy policy is transmitted to the economy.
      The Fed said it would continue with these purchases while its open market desk in New York will continue to offer large-scale overnight and term repurchase agreements and is "prepared to adjust its plans as appropriate."
     "The ongoing public health crises will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term," the Fed said.
     The impact of the virus is already causing sharp declines in economic activity - the U.S. gross domestic product shrank by 4.8 percent in the first quarter - and pushed up unemployment sharply.
     Weaker demand and lower oil prices will hold down inflation, the Fed said, adding it was "committee to using its full range of tools to support the U.S. economy in this challenging time" and expects to maintain its federal funds rate "until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals."
     The FOMC was unanimous in its policy decision.

Canada holds rate, to start buying corporate bonds

     Canada's central bank left its benchmark target for the overnight rate at a record low of 0.25 percent, as expected, but expanded its easing measures to include the purchase of corporate bonds to help meet the challenge of increased demand for near-term financing by governments, businesses and households, and set up conditions for an economic recovery.
     The Bank of Canada (BOC), which has cut its key rate three times this year by a total of 1.50 percentage points, said the necessary efforts to contain the spread of the COVID-19 virus had caused a "sudden and deep" contraction in global economic activity and employment.
     "The Bank's Governing Council stands ready to adjust the scale or duration of its programs if necessary," BOC said, adding its actions are aimed at bridging the current period of containment and create the conditions for a sustainable recovery and achievement of its inflation target.
     This sudden halt in global economic activity will be followed by regional recoveries at different times, depending on the duration and severity of the outbreak in each region.
     "This means that the global economic recovery, when it comes, could be protected and uneven," BOC said.
      At this point the economic outlook is too uncertain to provide a complete forecast, BOC said, adding various scenarios suggest economic activity was down 1-3 percent in the first quarter of this year and will be 15-30 percent lower in the second quarter than in the fourth quarter of 2019.
      In addition to earlier rate cuts, BOC has already injected some 150 billion Canadian dollars in asset purchases and today said it would continue to purchase at least $5 billion in government of Canada securities per week in the secondary market and will increase the level of purchases as required to ensure the market continues to function properly.
      BOC said it was also temporarily raising the amount of Treasury bills it would buy at auctions to up to 40 percent, was developing a new Provincial Bond Purchase program of up to $50 billion as a supplement to its Provincial Money Market Purchase Program.
      A new Corporate Bond Purchase Program was also being announced, in which BOC will buy up to $10 billion in investment grade corporate bonds in the secondary market while the bank's term repo facility would be enhanced to permit funding for up to 24 months.

Canada cuts rate 3rd time in March and to buy bonds

    Canada's central bank cut its benchmark interest rate for the third time in March, launched a program to purchase commercial paper to ease strains in short-term funding markets and will also begin buying government bonds in the secondary market.
    The Bank of Canada (BOC) cut its target for the overnight rate by another 50 basis points to 0.25 percent and has now cut it by 150 basis points following a first 50 points cut on March 4 and then a second 50 points cut on March 13.
     "This unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-10 pandemic," BOC said.
     Central banks worldwide have slashed their policy rates 99 times since the outbreak of the coronavirus began to impact financial markets in mid-January, many at emergency policy meetings.
    But BOC is the first central bank to cut its rate three times in less than a month.
    The latest cut follows another emergency policy meeting by BOC as central banks worldwide have now cut rates at 53 extraordinary meetings since March 3 when the U.S. Federal Reserve kicked off this month's rapid pace of monetary easing worldwide.
     "The spread of COVID-19 is having serious consequences for Canadians and for the economy, as is the abrupt decline in world oil prices," BOC said, adding its rate cuts, along with fiscal action, are aimed at supporting individuals and businesses, and minimizing any permanent damage to the structure of the country's economy.
     To promote the availability of credit, BOC has already expanded its repurchase facilities along with other measures, and is now launching two programs.
     A Commercial Paper Purchase Program (CPPP) is aimed at easing strains in the short-term funding markets and thus preserve a source of funding for businesses.
     To ease strains in the market for Canadian government debt, BOC will begin buying government securities in the secondary market, with purchases beginning with a minimum of $5 billion per week, across the yield curve.
     The program will be adjusted as conditions warrant, "but will continue until the economic recovery is well underway," leading to a larger balance sheet, BOC said.
     Prime Minister Justin Trudeau's government also unveiled several measures to support small- and medium-sized businesses, including one-year interest rate free loans, to cover 75 percent of wages for small business, 12.5 billion Canadian dollars in funding via the country's export development bank and delays in dories and tax payments.
     Earlier this week Canada's parliament approved a 52 billion Canadian dollar package to support the economy and people that have lost their jobs due to the spread of the virus.

U.S. Fed expands asset purchases, adds new lending

     The U.S. Federal Reserve is launching another round of measures to calm financial markets and support the flow of credit to households and businesses by launching three new credit facilities, adding agency commercial mortgage-backed securities to its shopping list, and continuing to purchase Treasury securities and offering large-scale overnight and term repos, with the amounts to be assessed at future meetings.
      "The coronavirus pandemic is causing tremendous hardship across the United States and around the world," the Fed's policy-setting committee, the Federal Open Market Committee (FOMC), said.
      "While great uncertainty remains, it has become clear that our economy will face severe disruptions,"  and "aggressive efforts" must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate," it added.
      On March 15, when the Fed cut its federal funds rate for the second time this month to effectively zero (a target range of 0.0 to 0.25 percent), it also began fresh purchases Treasuries of at least $500 billion and agency mortgage-backed securities of at least $200 billion.
      Today it said it would continue to buy Treasuries and agency mortgage-backed securities "in the amounts needed to support smooth market functioning," essentially an unlimited amount until it begins to rein in its asset purchases.
      To support the flow of credit to employers, consumers and businesses, the Fed will establish new programs of up to $300 billion in new financing, backed by the U.S. Treasury.
      Two of these new facilities are aimed at supporting credit to large employers and a third to support the flow of credit to consumers and businesses.
      The Primary Market Corporate Credit Facility (PMCCF) will help with new bond and loan issuance for large employers while the Secondary Market Corporate Credit Facility (SMCCF) will provide liquidity for outstanding corporate bonds.
      The Term Asset-Backed Securities Loan Facility (TALF) will enable the issuance of asset-backed securities backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
      The Fed said it was also expanding its flow of credit to municipalities by expanding its earlier-announced Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities and ease the flow of credit by expanding the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities.
     The Fed said it also expected to soon announce a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses.
     On March 15, when the Fed cut its rate for the second time this month,

Canada cuts rate another 50 bps and ready to ease more

     Canada's central bank cut its benchmark interest rate for the second time in 10 days as a "proactive measure taken in light of the negative shocks to Canada's economy from the COVID-19 pandemic and the recent sharp drop in oil prices," adding it was ready to adjust its monetary policy further if required to support the economy and keep inflation on target.
     The Bank of Canada (BOC) cut its target for the overnight rate by another 50 basis points to 0.75 percent and has now cut it by a full percentage point following the earlier cut on March 4, the first time it had cut the rate since raising it in October 2018.
     BOC is the sixth central bank to cut its rate at unscheduled policy meetings since the U.S. Federal Reserve's surprise cut on March 3.
     Canada's rate cut boosts the number of central banks that have cut rates this week to eight, with six banks cutting their rate by 50 basis points and the other two cutting by 100 points.
      Since Jan. 29, when Sri Lanka's central bank was the first to refer to the threat from the virus to global growth when it cut its rate, 31 central banks have cut their rates, with BOC the only central bank to cut its rate twice.
     "It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for the Canadian economy," BOC said, adding lower oil prices will weigh heavily on the economy, particularly in energy intensive regions.
     BOC will update its outlook for the economy at its next scheduled policy meeting on April 15.
     In January BOC forecast 1.6 percent growth for 2020, unchanged from 2019, and 2.0 percent growth for 2021.
     In a separate statement, BOC also announced it was planning to launch a Banker's Acceptance Purchase Facility (BAPF) and starting March 23 it would conduct secondary market purchases of 1-month acceptances.
      The bankers' acceptance market is one of Canada's core funding markets and a key source of funding for small- and medium-sized corporate borrowers.
      BOC has also taken other steps to ensure liquidity in the financial system, including broadening the scope of its bond buyback program.
      The first operation will be a C$500 million switch operation in the 30-year sector on March 16 and on March 17 BOC will temporarily add new term repo operations with terms of 6 and 12 months.  
     The operations will take place bi-weekly, with C$4 billion and C$3 billion offered that day for 168 day and 350 day maturities, respectively.

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