Although Canada's central bank is maintaining its key rate at 0.25%, it submitted a hopeful reexamination to its economic outlook yesterday.
The BoC announced it will slow its roll in federal government bond buying that has played a role in its quantitative easing - a program designed to inject money into the economy to expand economic activity. The bank also changed its forecast of when it expects the country's economic health can handle a rate increase. It now expects inflation to be back at its 2% objective by the end of 2022, as opposed to mid 2023.
Canada's economy faces the stark reality and accompanying stresses of a third wave of COVID-19, which is an undoubted menace to the pace of economic recovery and growth says the bank.
Bank of Canada's governor Tiff Macklem hopes families and businesses can muster the same fortitude as shown during the second wave of early 2021. “Vaccines are rolling out, and there are brighter, brighter days ahead and reflecting that we have revised up our outlook,” Macklem said during a late-morning press conference.
“But, it is still going to take some time to get to a complete recovery. This third wave is a setback. It is straining health-care systems in part of the country.”
The bank foresees the more stringent restrictions of the third wave to result in a surge of job losses, especially in low-wage and part-time positions. The bank expects unemployed Canadians to hold their savings acquired during the past year as a precaution, rather than spending in droves. Canadians have put together an average of $5,800 additional savings during the pandemic.
"We really need to be careful about averages when it comes to this recession because it has been so uneven," said Finance Minister Chrystia Freeland yesterday.
Looking at employment levels for the last month, the BoC figures that another 300,000 people would need to find work to return to pre-pandemic levels.
Macklem indicated the central bank will watch the labor market closely before considering raising rates. “You’re seeing a recession and recovery like we’ve never experienced before,” Macklem said. “We’re looking for a complete recovery, and that’s going to take some time," he added.