In a statement, the Canadian central bank said it expects economic growth in the first quarter of 2021 to be positive.
"In Canada, the economy is proving to be more resilient than anticipated to the second wave of the virus and the associated containment measures," the bank said, noting that GDP growth in the fourth quarter of 2020 was 9.6 percent, twice what the bank had expected and that GDP is now expected to grow in the first quarter of 2021 rather than contract.
"Consumers and businesses are adapting to containment measures, and housing market activity has been much stronger than expected. Improving foreign demand and higher commodity prices have also brightened the prospects for exports and business investment," it said.
However, it warned that considerable uncertainty of the COVID-19 pandemic could influence longer-term economic outlooks as there is still considerable slack in the economy and "a great deal of uncertainty about the evolution of the virus and the path of economic growth."
It said the labor market is "a long way from recovery," noting that employment is still well below pre-pandemic levels, and that low-wage workers, young people and women have been hit the hardest.
The bank said its key interest rate will stay at 0.25 percent until the economy recovers and inflation is back at its two percent level.
"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. In the Bank's January projection, this does not happen until into 2023," the bank said.
The bank also said that it will continue buying four billion Canadian dollars worth of government of Canada bonds each week as part of its quantitative easing program until the recovery is well underway.
The key interest rate has been at 0.25 percent for almost one year after the central bank cut rates three times last March due to impact of the COVID-19 pandemic.
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