Browse recent monetary policy statements issued by many central banks around the world and you will notice a central theme: the economic recovery from this year fueled by vaccinations, the easing of restrictions (in some countries), adaptation of businesses and consumers to coronavirus checks on their normal activities.
This optimism is collectively embodied by upward revisions in the “ OECD Economic Outlook, March 2021 Interim Report ” – “Global GDP growth is now expected to stand at 5.6% this year, a more than one percentage point upward revision from the December OECD Economic Outlook. ”- and the IMF’s“ World Economic Outlook Update, January 2021 ”-“ Policy support and vaccines expected to increase the activity “.
Asserting that they can (almost) all be, they didn’t cut their rhetoric – preferring to wait for better days than the optimistic days they anticipate. Not the Bank of Canada (BOC).
It decided to gradually reduce QE at the end of its meeting on April 21, namely:
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“The Bank of Canada today kept its overnight rate target at the effective lower limit of 1/4 percent, with the bank rate at 1/2 percent and the deposit rate at 1/4. The Bank continues to offer extraordinary futures guidance on the path of the overnight rate, enhanced and supplemented by the Bank’s quantitative easing (QE) program. Beginning in the week of April 26 , weekly net purchases of Government of Canada bonds will be adjusted to a target of $ 3 billion. This adjustment: The amount of additional stimulus added each week reflects progress in the economic recovery. “
This is due to the fact …
“Global economic growth is stronger than forecast in the January Monetary Policy Report (MPR) …”
“In Canada, first-quarter growth looks considerably stronger than the Bank’s forecast in January, as households and businesses adjusted to the second wave and the associated restrictions. the labor market remains difficult for many Canadians, especially for low-wage workers, youth and women. As vaccines roll out and the economy reopens, consumption is expected to rebound strongly in the second half of this year and remain robust over the projection. “
“… strong growth in foreign demand and rising commodity prices are expected to lead to a strong recovery in exports and business investment.”
Yet the BOC believes that “the recovery continues to require extraordinary monetary policy support.”
But by taking the first step towards normalizing monetary policy, the BOC is sending a powerful message that its optimism is more than lip service.
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