The Globe and Mail reports in its Thursday, April 22, edition that the Bank of Canada took a significant step toward unwinding its emergency stimulus on Wednesday. The Globe's Mark Rendell writes that the BOC said it will reduce its pace of government of Canada bond purchases, known as quantitative easing, to $3-billion a week from $4-billion. It kept its overnight policy rate at 0.25 per cent, but shifted its forward guidance for a potential rate hike to the second half of 2022 from 2023.
This puts the BOC ahead of the U.S. Federal Reserve in unwinding monetary stimulus.
The bank now expects the Canadian economy to grow 6.5 per cent this year, up from 4 per cent that it forecast in January, and notably higher than the 5.8-per-cent GDP growth projection the federal government used in its budget on Monday.
This revision is driven in large part by stronger-than-expected growth in the first quarter of 2021. GDP is expected to have grown by about 7 per cent in the first three months of the year despite a second wave of COVID-19 infections and heightened lockdown measures.
That is a stunning contrast to the bank's January forecast, when it predicted GDP would shrink by 2.5 per cent in the quarter.
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