Rates were unchanged at 0.25% and bond purchases are set to continue at least at $4billion per week. However, the Bank of Canada still doesn’t want to bring rate hikes forward and the Governing Council expects that economic slack will not be absorbed until into 2023. The economy is 1% higher then the BoC had anticipated.


To move above 2% towards 3% temporarily over the coming months. This inflation is to be driven by the prices of numerous goods and services that fell sharply during the pandemic and rising oil prices.

Employment among young is key

One of the concerns of the BoC at the rate meeting was over job losses being concentrated among low age workers, you people and women. This theme was picked upon by Deputy Governor Schembri the day after the rate meeting who said that the labour market remains a long way from a full recovery. You can read his statement here.

Similarly to New Zealand, the housing market has seen strength in Canada. So far, the BoC is not going to step into cool the housing market by rising interest rates. Remember this is a pressure the RBNZ has to deal with. See here for a reminder on that issue.

Grew by +9.6% in 2020 and GDP growth in Q1 2021 now expected to be positive.

Savings are up

Household savings have risen by about $5800 per Canadian.

However, the BoC are unsure exactly how these savings will be spent in the future. There is obviously a more cautions tone around, so people will be slower to spend savings for sure. The three things most people seem to be doing with their savings now in Canada according to the BoC is: putting it in the bank as deposits (personal deposits up by $150 billion), paying off debt, buying houses (fuelling the strong housing market), and buying financial assets and retirement plans. What happens with the excess savings is important as it is enough to impact the direction of the Canadian economy. So this is why the BoC asked respondents what people would do with their savings. 5% plan to spend it all in 2021 and 14% plan on spending some. This survey was conducted in November. See here. The BoC are working on a boost per capita to consumption of $500.

The takeaway

The BoC are optimistic, but recognise risks. Oil prices are supportive and the economy is not expected to shrink now for Q1. All in all interest rates are expected to rise in 2023 and the market is pricing in a 2022 hike. For now, expect CAD buyers on dips. The next move from the BoC will be mentioning tapering of bond purchases as long as there are no further negative surprises.

You can read the full statement here. The next meeting is on April 12.