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MNI BOC Preview - October 2021: Steady Rate With Taper

MNI BoC Preview - October 2021: Steady Rate with Taper

MNI BOC Preview - October 2021: Steady Rate with Taper

EXECUTIVE SUMMARY

  • The Bank of Canada is expected to keep the policy rate steady at 0.25 Wednesday, while continuing a pattern of tapering at meetings with a Monetary Policy Report from C$2B to C$1B/wk.
  • By doing so, the Bank will effectively "move into a reinvestment phase of buying new securities only to replace those that are maturing, thus maintaining its bond holdings at the same level," Desjardins economists said.
  • Moving to the reinvestment phase is "justified by the recovery in the Canadian economy ... and mounting fears surrounding inflation," Desjardins added. The "Monetary Policy Report should, however, include a downgrade in BoC forecasts for Canada's real GDP due to the difficulties associated with the third wave of the pandemic."
  • CIBC Capital Markets economists also expect a C$1B taper, however. "with no additional action at this time. The Bank will need to explicitly tell us they are in reinvestment, and we do not expect that to happen until the January MPR. Remember that reinvestment is not just a reduction of secondary purchases, it includes primary purchases as well."

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MNI Bank of Canada October 2021 Preview.pdf


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