The Conference Board of Canada’s Economist Sasan Fouladirad offers the following insights on
today’s Bank of Canada interest announcement and release of its updated Monetary Policy Report:
“The Bank of
Canada held its policy interest rate steady while continuing its weekly net purchases of
Government of Canada bonds with a target of $3 billion per week. CPI inflation is around
the top of the 1-3 per cent target range but the Bank expects that to ease in the second
half of the year. As a result, according to the Bank’s projection, a rate hike is not
expected until the second half of 2022 when inflation target is sustainably met.”
- The Bank of Canada held its target for the overnight rate at 0.25 per cent today,
recognizing that although the Canadian economy is on a path towards recovery, it still
requires extraordinary monetary policy support. - Although first quarter GDP growth of 5.6 per cent was lower than the Bank expected, it
remained optimistic because of stronger than expected household spending and imports.
Despite the positive signals, the third wave of the pandemic has weighed on economic
activity in the second quarter and questions about potential variants continue to cloud the
inflation outlook. - Today’s announcement aligns with our latest national forecast, completed in March, which
expects that the Canadian economy will not experience significant growth until the second
half of this year, while anticipating interest rates will remain low for the foreseeable
future. - We continue to expect that Canada’s real GDP will reach its pre-pandemic level by the end
of this year if there are no further hiccups in the fight against the pandemic.
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