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The Bank of Canada kept, as expected, the interest rate and the QE program unchanged after the monetary policy meeting on Thursday. Analysts at CIBC, look for the BoC to recalibrate towards lower gross bond purchases, probably in April. 

Key Quotes: 

“While the Bank of Canada maintained its current pace for QE purchases of $4 billion or more per week, changes appear to be in store over the balance of this year. Not that it will end the program in its entirety, but the statement talks about adjusting “net purchases” as required. The next three months will see an acceleration in maturities of bills and term repos, so the Bank can maintain its existing level of gross purchases without ballooning the balance sheet. Beyond that (i.e. in April and beyond) we look for the BoC to recalibrate towards lower gross bond purchases, with would also make sense given lighter gross issuance from the government and a desire to avoid owning too much of the market.”

“This is a less dovish Bank of Canada than some may have thought, because it’s a central bank that has greater confidence in the recovery ahead. But make no mistake, this is still a dovish policy stance, one that will hold interest rates at rock bottom levels for another two years, and continue to buy bonds this year to keep longer rates from too sharp a climb. We’ll need to see a more optimistic take from the Fed about the US outlook, perhaps supported by Biden’s fiscal stimulus plans, to defend against a undue appreciation of the loonie, or those trade headwinds to growth and inflation could become more problematic.”