Good Morning!
Well, that was a surprise.
The Bank of Canada took a step towards easing pandemic stimulus yesterday — the biggest yet by a major economy — with a hawkishness that surprised many observers.
Not only did it say it would reduce purchases of government debt (which was expected), it also brought forward its timeline for a possible rate hike.
Previously, the Bank had forecast that slack in the economy would not be absorbed until 2023. Now it expects that to happen some time in the second half of 2022.
The reason is a much brighter view of the economy. The Bank hiked its growth forecast for 2021 by more than two percentage points to 6.5%. It’s now predicting 3.7% in 2022 and 3.2% in 2023, an outlook rosier than many economists.