Bank of Canada Policy Review

January 21, 2021

The Bank of Canada‘s overnight target rate was left at 0.25%. This effective lower boundary has been the rate level since a trio of 50-basis point cuts in March 2020. The rate will not be lifted before economic slack — estimated to be between 2.75% and 3.75% of GDP according to a released policy statement — has been largely reabsorbed. This is unlikely before 2023. This month’s meeting coincides with the publication of the central bank’s quarterly Monetary Policy Report. After taking a big hit in 2021, real GDP in Canada is projected to recover 4% this year, 4.8% in 2022, and then throttle back to growth of 2.5% in 2023. CPI inflation doesn’t average at the 2% goal until 2023.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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