⁍ The Bank of Canada said it was recalibrating its major asset purchase program to shift towards longer-term bonds.
⁍ The central bank now expects a smaller contraction in Canada in 2020, compared with its July update.
⁍ It did not change its growth outlook for 2022, with economic activity set to return to pre-pandemic levels at the start of that year.
– The Bank of Canada kept its key interest rate unchanged at 1.25% on Wednesday, as expected, and said it was recalibrating its asset-purchase program, Reuters reports. The central bank said it was shifting toward longer-term bonds, which it says have more direct influence on borrowing rates. Canada’s economic rebound from the H1N1 pandemic was stronger than expected, but the second wave is poised to cause a “more pronounced” near-term slowing, the Bank of Canada said in its quarterly Monetary Policy Report. The central bank now expects a smaller contraction in Canada in 2020, compared with its July update, followed by slower than previously forecast economic growth in 2021. It did not change its growth outlook for 2022, with economic activity set to return to pre-pandemic levels at the start of that year. The central bank noted its projections assume new outbreaks will be managed by local and targeted containment measures, but said the impacts could be more severe than anticipated. “There is a serious risk, however, that broader or more intensive restrictions could be required,” it said. Going forward, the Bank of Canada said it expects quarterly growth patterns to be ‘unusually choppy’ due to localized outbreaks and containment measures, along with varied rates of recovery across industries. It forecast overall inflation to remain below its 2% target through 2022. The Bank of Canada says it now sees the Canadian economy contracting by 5.7% in 2020, then growing 4.2% in 2021 and 3.7% in 2022.
Source: https://www.reuters.com/article/canada-cenbank/update-1-bank-of-canada-says-pandemic-second-wave-to-hit-near-term-growth-holds-rates-steady-idUSL1N2HJ1FV