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My message today is increased confidence and continued attention

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Opening statement from Macklem

Opening statement from Macklem
  • Economy has proven to be impressively resilient
  • If the 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
  • The Canadian dollar is close to where it was
    in April relative to the US dollar, 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 the next few months as the reopening process continues
  • We still have more than 500K 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. But these 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.
  • economy is projected to move into modest
    excess demand, so inflation is slightly above target through 2023 before
    moving toward target in 2024
  • QE taper reflects increased confidence in the strength of the Canadian economic outlook.
  • Full text

The headline here about increased confidence relates to higher growth (of fewer risks about a growth miss) and ‘continued attention’ relates to uncertainty on inflation.

The comments on gradual tapering indicate another cut to $1b in Oct and an end to new purchases in January. That’s ever second meeting and corresponding with MPR forecasts. Then the BOC will start to tee up a hike for H2 2022. I expect that will come early in H2 2022.

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