Bank of Canada ends QE and signals earlier rate hikes

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Bank ends bond-buying stimulus programme and revises inflation outlook higher but says it’s transitory

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Bank of Canada Tiff Macklem speaks during a news conference in Ottawa, Ontario, Canada, October 27 2021. Picture: ADRIAN WYLD/CANADIAN PRESS/BLOOMBERG

“The Canadian economy is once again growing robustly,” it said in its quarterly monetary policy report. “The Bank now expects economic slack will be absorbed sometime in the middle quarters of 2022.” “There’s really no need for an ultra-stimulative monetary policy at this point,” said Doug Porter, chief economist for BMO Capital Markets. “We now expect them to start raising rates in July of next year, and we would look for hikes of a quarter point per calendar quarter.”The Canadian dollar was trading 0.5% higher at 1.2327 to the greenback, or 81.12c, while the 2-year yield touched its highest since March 2020 at 1.147%, before dipping to 1.073%, up 20.6 basis points on the day.

Headline inflation is expected to remain above its 1% to 3% control range for longer than previously thought, the bank said, easing back closer to target in late 2022. It forecast inflation at 4.8% in the fourth quarter of this year, easing to 2.1% in the fourth quarter of 2022.

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