CIBC Research discusses its reaction to today's BoC January policy decision.
"Vaccines are riding to the rescue of the Bank of Canada’s economic outlook. But with the pandemic still raging for now, the Canadian dollar perhaps looking at bit too strong and inflation too low for its liking, the Bank of Canada underscored that it will be very patient in deciding when to take its foot off the gas. To not much surprise, the overnight rate was left at 25 bps, and for now, the BoC will maintain its pledge to buy $4 bn or more in bonds per week," CIBC notes.
"The forecast looks for a GDP drop in Q1, but tied to optimism on vaccines, has lifted growth for the next 2 years to 4% in 2021, and nearly 5% in 2022, only a touch below CIBC’s projection but a big upgrade to the Bank’s ’22 outlook. We expect the Bank to further taper its bond buying program in April to avoid owning too much of the outstanding market, but rate hikes aren’t in the cards until 2023 (that’s the first year for sustained 2% inflation) and particularly, likely not until the Fed has moved first to avoid pushing the loonie still stronger," CIBC adds.