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MNI BOC Review - CORRECT July'21: Full Recovery, Not There Yet

MNI BOC Review - July 2021: Full Recovery -- Not There Yet

Executive Summary

As expected, the Bank of Canada held it's policy rate steady at the lower bound of 0.25% (bank rate at 0.5, deposit rate at 0.25) Wednesday, while tapering weekly bond purchases by CAD1 billion to CAD2 billion a week.

The Bank reiterated their commitment "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. Based on our current projection, this happens sometime in the second half of 2022."

Source: BOC MPR

The tapering of weekly bond purchases down to CAD2 billion a week reflects the Bank's "increased confidence in the strength of the Canadian economic outlook" and "continued progress towards recovery."

  • "Decisions regarding further adjustments to the pace of net bond purchases will be guided by the Governing Council's ongoing assessment of the strength and durability of the recovery. If the economy evolves broadly in line with our outlook, then over time it won't need as much QE. Further adjustments to our QE program will continue to be gradual, and we will be deliberate both in our assessment of incoming data and in the communication of our analysis. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective."

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