The BoC held rates at 0.25% but the surprise this month was that the central bank was a little more neutral than many market participants were expecting. Yes, they cut asset purchases from $3 bln to $2 bln and they still see lifting rates around 2022. The adjustment was expected and due to the ‘continued progress towards recovery and the Bank’s increased confidence in the strength of the Canadian economic outlook’.The last BoC meeting had been a holding meeting after the hawkish surprise they gave in April. This was far more neutral in tone.


In a word they, like the Fed, see it as transitory. This seems correct as globalisation and automation should/will keep inflationary pressures contained. However, there is a general risk here that inflation can get out of control in the short term. The fear of inflation is enough to drive inflation. If a consumer fears that the purchase they are going to make is only going to be more expensive in one month’s time, then why delay future purchases? The BoC tipped the hat to this by saying that ‘the factors pushing up inflation are transitory, but their persistence and magnitude are uncertain and will be monitored closely’.


The BoC expects growth of around 6% in 2021 (lower than previously forecast), 4½% in 2022 (revised higher) and 3¼% in 2023. Consumption is expected to lead the domestic recovery and International demand to underpin an exports recovery.


The broad view was one of vaccine confidence with a touch of uncertainty concerning the delta variant and spreading where vaccination rates were low, However, Canada has vaccinated around 46% of their population.

The takeaway

Nothing much to note aside from the fact that the CAD may retrace a little against stronger currencies like the NZD after the RBNZ’s hawkish shift last week.

Next decision Sep 08. Read full BoC report here.