The Bank of Canada is curtailing emergency stimulus as it declared yesterday that it would once again recede bond purchasing - a hint of its optimism in regards to economic recovery.
A group led by Governor Tiff Macklem announced that they would decrease their weekly government debt purchases by one-third to a mark of 2$ billion. Unsurprisingly, The BoC maintained its key interest rate at 0.25 percent and hinted that they wouldn't foresee any increases before at least the middle of 2022, which is on schedule with previous declarations.
The choice to slow purchases furthers the bank's slow and steady return to regular policy. That is the third time that bank officials have trimmed the asset purchase program, bolstering the likelihood that the Bank of Canada will be one of the first central banks to increase rates.
“This adjustment reflects continued progress towards recovery and the Bank’s increased confidence in the strength of the Canadian economic outlook,” announced Macklem in the press conference's opening statement.
Today's outcome was to be expected by economists, and is consistent with market trends and forecasts of a rate hike period that is likely to begin in the second half of next year.
BoC executives restated that further tapering will be contingent on their judgement of the economic recovery's "strength and durability." The bank added that it won't raise the benchmark rate until complete recovery and inflation is steadily at 2 percent.
In its most recent Monetary Policy Report, the BoC revisited its outlook on output and inflation as households are expected to begin spending the cash they've been saving over the course of the pandemic.
The central bank's forecasts still urge caution, though, as it focused on the importance of reaching a "full and inclusive" economic recovery.
The BoC revealed that inflation will hover over 3 percent for most of 2021. It explained that the rise is indicative of gasoline prices, repercussions of last year's lockdowns and supply chain disruptions. The bank of Canada predicts that the economy will face cycles of surplus of demand by 2023.