BoC left overnight rate unchanged at effective lower bound of 0.25% as widely expected. Bank rate and deposit rate are held at 0.50% and 0.25% respectively. It maintained the forward guidance that conditions for rate hike is expected to happen “some time in the second half of 2022”.
The central bank also continued tapering and reduce weekly asset purchase target to CAD 2B, down from CAD 3B. It said that, “this adjustment reflects continued progress towards recovery and the Bank’s increased confidence in the strength of the Canadian economic outlook.”
As third wave of coronavirus slowed growth in Q2, BoC now expects around 6% GDP growth in 2021, “a little slower than was expected in April”. But it has revised up its 2022 forecast to 4.50% and projects 3.25% growth in 2023.
On inflation,with higher gasoline prices and on-going supply bottlenecks, it’s likely to “remain above 3 percent through the second half of this year”, then ease back to 2% in 2022.
