BoC's governor Macklem: Further adjustments to our QE program will continue to be gradual
14.07.2021, 15:21

BoC's governor Macklem: Further adjustments to our QE program will continue to be gradual

  • My message today is twofold - of increased confidence and of continued attention
  • With cases falling, rapid progress on vaccinations and easing containment measures, Governing Council is increasingly confident that growth will rebound strongly as economy once again reopens, and this time growth will be more durable
  • There is continued need for careful attention to the dynamics of the recovery and inflation
  • Globally, economic outlook remains highly dependent on course of the virus and new variants are a concern. In Canada, we still have some way to go to a complete recovery
  • Process of reopening the economy won’t be entirely smooth
  • As we reopen the economy, we expect to see some volatility, and we will continue to pay close attention to the progress of recovery and to evolution of inflation
  • CAD is close to where it was in April relative to USD, but it is slightly stronger against a broader basket of currencies
  • Consumption is expected to continue to lead the recovery
  • Employment should continue to rebound over next few months as reopening process continues; we still have more than 500,000 jobs to recoup
  • Supply bottlenecks are creating sharper movement in prices that is pushing inflation temporarily higher, and these supply issues now look more important than previously thought
  • Inflation is now projected to be somewhat above the target band through 2021
  • Temporary effects are forecast to dissipate near the end of this year and inflation is forecast to ease back toward 2 percent in 2022
  • We expect the factors pushing up inflation to be temporary, but their persistence and magnitude are uncertain, and we will be watching them closely
  • We decided to adjust QE program to a target of $2 billion weekly purchases of Government of Canada bonds, down from a target of $3 billion a week; this adjustment reflects continued progress towards recovery and the Bank’s increased confidence in the strength of the Canadian economic outlook
  • Decisions regarding further adjustments to the pace of net bond purchases will be guided by Governing Council’s ongoing assessment of the strength and durability of the recovery
  • If economy evolves broadly in line with our outlook, then over time it won’t need as much QE
  • Further adjustments to our QE program will continue to be gradual, and we will be deliberate both in our assessment of incoming data and in communication of our analysis
  • We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective

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