OTTAWA (Reuters) – The Financial institution of Canada on Wednesday revised to constructive its outlook for GDP development within the first quarter, saying Canada’s financial system was proving extra resilient to a second wave of COVID-19 than anticipated, and held its key in a single day charge regular.
The central financial institution additionally reiterated that rates of interest would stay at a report low zero.25% till financial slack is absorbed, which in its January forecast doesn’t occur till into 2023, and stored the present tempo of its bond-buying program.
“In Canada, the financial system is proving to be extra resilient than anticipated to the second wave of the virus and the related containment measures,” the BoC mentioned in its assertion.
“GDP development within the first quarter of 2021 is now anticipated to be constructive, relatively than the contraction forecast in January.”
Analysts mentioned the assertion was largely in step with expectations, with any tweaks to coverage or tone punted to April, when the Financial institution of Canada will launch its up to date forecasts.
“They admitted the apparent – that the financial system had carried out higher than anticipated on the flip of the 12 months,” mentioned Doug Porter, chief economist at BMO Capital Markets. “However they bolstered the message that they aren’t going wherever quickly with coverage.”
The central financial institution mentioned that whereas financial prospects have improved, the restoration nonetheless requires extraordinary financial coverage assist.
It additionally famous employment stays effectively beneath pre-pandemic ranges and highlighted the chance that new outbreaks of extra transmittable variants of COVID-19 may add to the choppiness of the restoration.
“This doesn’t sound like a financial institution that’s going to withdraw stimulus as rapidly and as instantly as markets count on, though it could present a timeline for QE tapering as early as April,” mentioned Simon Harvey, Senior FX market analyst for Monex Canada.
“For that, the development of vaccines and incoming information shall be key,” he added.
The surprising power of Canada’s financial system by means of the tip of 2020 and into 2021 has boosted bets that the central financial institution will hike charges earlier than their present steerage.
Final month, Financial institution of Canada Governor Tiff Macklem mentioned Canada’s financial system would see a strong and sustained rebound this 12 months as inoculations ramp up, however warned a full restoration was nonetheless a methods off.
The Canadian greenback was buying and selling zero.1% decrease at 1.2650 to the dollar, or 79.05 U.S. cents after the speed determination.
($1 = 1.2646 Canadian )
Reporting by Julie Gordon, David Ljunggren and Steve Scherer in Ottawa; further reporting by Fergal Smith, Maiya Keidan and Nia William; Enhancing by Chizu Nomiyama and David Gregorio