BoC’s Macklem: Economic recovery is choppy and a lot of uncertainties remain

Bank of Canada (BoC) Governor Tiff Macklem said on Thursday that the fourth wave of COVID-19 poses a risk and added that it could weigh on Canada’s economic outlook, as reported by Reuters.

Additional takeaways

“We are moving closer to a time when continuing to add stimulus through QE won’t be necessary; we are not there yet.”

“Timing of that move is a monetary policy decision that will depend on economic developments.”

“Once new QE stimulus is no longer needed, we’ll need to embark on reinvestment phase, buying enough bonds to replace those that are maturing; we will signal this moment clearly.”

“Reasonable to expect that when we reach the reinvestment phase, we will remain there for a period of time, at least until we raise rates.”

“When we get to reinvestment phase, and how long it lasts, will depend on strength of recovery and evolution of inflation.”

“Reinvesting in maturing bonds will require purchases ranging around C$1 billion a week on average.”

“When we do need to reduce monetary stimulus, our first move will be to raise rates.”

“Bank plans to establish a target range during the reinvestment phase of between C$4 billion and C$5 billion a month to keep total holdings of the government of Canada bonds roughly stable over time.”

“Target range will include primary and secondary market purchases.”

“Economic recovery is choppy and a lot of uncertainties remain; bank still expects the economy to strengthen in the second half of 2021.”

“Higher than forecast inflation caused in part by supply disruption driving up prices for autos, other goods.”

Market reaction

The USD/CAD pair continues to edge lower following these comments and was last seen lşosing 0.48% on the day at 1.2629.

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