Highlights of the Bank of Canada statement

Macklem BOC leader
  • Rate of QE unchanged at $2B per week, as expected
  • Rates left unchanged at 0.25%, as entirely expected
  • "Supply chain disruptions are restraining activity in some sectors and rising cases of COVID-19 in many regions pose a risk to the strength of the global recovery"
  • The global economic recovery continued through the second quarter
  • Weak Q2 GDP largely reflects a contraction in exports, due in part to supply chain disruptions, especially in the auto sector
  • Housing market activity pulled back from recent high levels, largely as expected
  • BOC continues to expect the economy to strengthen in the second half of 2021, although the fourth wave of COVID-19 infections and ongoing supply bottlenecks could weigh on the recovery
  • Factors pushing up inflation are expected to be transitory
  • This is a statement-only release, no projections or press conference
  • Macklem will deliver a speech tomorrow

Here's the final paragraph, which includes the BOC's guidance. It's exactly the same as in July:

The Governing Council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank's July projection, this happens in the second half of 2022. The Bank's QE program continues to reinforce this commitment and keep interest rates low across the yield curve. Decisions regarding future adjustments to the pace of net bond purchases will be guided by Governing Council's ongoing assessment of the strength and durability of the recovery. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.

The Canadian dollar initially rose on the headlines but is back to unchanged. There were many market watchers looking for a signal on delaying the taper but there's nothing here like that. There's not even a strong nod to growing uncertainty or the likelihood that the BOC's +6% GDP growth forecast for this year is highly unlikely to be reached. There is a nod to increasing bottlenecks but in general the statement isn't as dovish or as cautious as feared.