The Globe and Mail reports in its Monday, April 19, edition that the Bank of Canada is expected to reduce its pace of federal government bond buying this week in response to an improving economic outlook. The Globe's Mark Rendell writes that most analysts are forecasting a $1-billion cut to the BOC's weekly bond-buying program (also called quantitative easing or QE) in its rate decision on Wednesday. The bank is currently buying at least $4-billion worth of federal government bonds each week in an effort to keep benchmark interest rates down and stimulate borrowing.
There is less consensus on what the bank will say about timing for interest-rate hikes. Since October, the bank has maintained that it does not expect to raise its overnight policy rate until 2023. However, with recent GDP and employment data coming in stronger than anticipated, it may decide to shift its forward guidance for a rate hike to 2022.
Wednesday's decision will be delivered alongside a new Monetary Policy Report (MPR). Commercial bank economists now expect Canada's GDP to grow by about 6 per cent in 2021, two percentage points higher than projected in the January MPR.
These changes underpin the argument for tapering QE this week.
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