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THE REAL ECONOMY

RSM Canada Financial Conditions Index update
THE REAL ECONOMY | July 19, 2021

At its June policy meeting, the Bank of Canada reiterated its intention to maintain an accommodative monetary policy as uncertainty over the pandemic abates and the economy recovers.

As it has since the pandemic, the bank is keeping its policy rate at near zero to maintain liquidity in the commercial markets while continuing its purchases of long-term securities to pressure interest rates lower and facilitate long-term investment.

As it said in its June policy statement, the bank noted the increased prospects for growth, but also cited the need for a consistent policy in the face of uneven growth among the global economies and the threat of a resurgent virus.

The bank also noted the threat of further shutdowns and an employment rate that remains well below its pre-pandemic level, “with low-wage workers, youth and women continuing to bear the brunt of job losses.”

MIDDLE MARKET INSIGHT
We expect the Bank of Canada will keep its policy rate at the zero bound over the summer, if not into next year.

Because of the slack remaining in the economy, we expect the bank will keep its policy rate at the zero bound over the summer, if not into next year. We also think the bank will wait until the fall before considering altering its asset purchases and will need more time to assess developments in the labour market.

Nevertheless, the bank also noted rising confidence and resilient demand. Vaccinations continue to make it easier for Canadians to live normally again. Though the second-quarter economic data is uneven, the prospect of a safer environment has lifted consumer confidence and retail spending.

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Source: RSM Canada LLP

Used with permission as a member of RSM Canada Alliance

RSM Canada Financial Conditions Index update

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