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Bank of Canada keeps key rate unchanged, sees growth picking up this year

Kitco News

OTTAWA (Reuters) -The Bank of Canada on Wednesday left its key interest rate unchanged at a record low 0.25%, as expected, and said the economy would "rebound strongly" as vaccinations against COVID-19 picked up.

The bank reiterated its guidance that rates would remain unchanged until at least the second half of 2022, noting there remained considerable excess in the economy.

The bank said while second quarter growth would be hit by measures taken to fight a third wave of coronavirus infections, the longer-term prospects were good.

"With vaccinations proceeding at a faster pace, and provincial containment restrictions on an easing path over the summer, the Canadian economy is expected to rebound strongly, led by consumer spending," it said in a statement that analysts said did not break much new ground.

The central bank plans to maintain its current policy of quantitative easing. It is aiming to buy C$3 billion of government bonds a week as part of attempts to aid the recovery.

"They are pretty clear they are looking through the soft patch in the economy ... that's a pretty strong signal they are not going to be easily blown off course," said Derek Holt, vice president of capital markets at Scotiabank.

The Canadian dollar steadied at about C$1.2065 to the U.S. dollar, or 82.88 U.S. cents, before slipping to C$1.2094, or 82.69 U.S. cents.

Overall inflation would likely remain at 3% through the summer, above the bank's 2% target, before easing later in the year, the bank said. Measures of core inflation had also risen due primarily to temporary factors, it noted.

"They touched on all the issues they'd be expected to touch upon, with the least amount of detail that would be acceptable," said Andrew Kelvin, chief Canada strategist at TD Securities.

"In a meeting where they're comfortable with the outlook and they don't feel like they need to signal changes, sometimes less is more," he said by phone.

Additional reporting by Nichola Saminather and Fergal Smith in Toronto and Nia Williams in CalgaryEditing by Chizu Nomiyama

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