Bank of Canada to keep rates unchanged next week, to announce further tapering – Wells Fargo

Next Wednesday, the Bank of Canada (BoC) will have its monetary policy meeting. According to analysts at Wells Fargo, the central bank will keep rates unchanged at 0.25%. They consider the BoC could announce more tapering of its purchase program.  

Key Quotes:  

“As the economic outlook for Canada’s economy brightens, the Bank of Canada (BoC) has begun to offer signals and guidance about potential adjustments to its monetary policy path. Some of these adjustments have already occurred and are clearly evident in the BoC’s actions. For example, the size of the balance sheet has fallen perceptibly over the past few weeks. There have also been some noticeable changes in the composition of the BoC balance sheet. Holdings of Canadian government bonds continue to grow; however, Treasury bill holdings and total outstanding repo transactions are components of the balance sheet that have fallen. In addition, the BoC has discontinued some emergency liquidity programs and started to highlight the possibility of tapering asset purchases even further.”

“We believe the BoC will announce further tapering of its Canadian government bond purchases at its April 21 meeting, reducing its purchases to at least C$3 billion per week, from the current pace of at least C$4 billion per week. While we do not expect any changes to policy rates next week, we do feel the BoC will look to lift interest rates in the second half of 2022.”