At 22:00 on Wednesday (June 3), Beijing time, the Bank of Canada maintained interest rates, but expected to cool down in the second quarter of economic contraction. As of press time, the dollar fell 57 points against the Canadian dollar to 1.3483.
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The Bank of Canada left the overnight loan rate unchanged at 0.25%. And reduced some market operations. The Bank of Canada reduced the frequency of periodic reports to once a week.
The Bank of Canada also expects that the economy will shrink by 12% to 22% in the second quarter, better than the previously expected shrinkage of 15%-30%; the chain may decline by 10%-20%.
The Bank of Canada’s resolution stated that it will continue to work on economic recovery, and the uncertainty about how the recovery will unfold remains high.
The Bank of Canada’s resolution stated that it would continue to commit to large-scale asset purchases until the economy fully began to recover. Any further policy actions will be calibrated to provide the necessary monetary policy easing required to achieve inflation targets.
The Bank of Canada’s resolution stated that the impact of the epidemic appears to have reached its peak and is more optimistic about the extent of the recession than before. As the market function improves and the restrictive measures taken against the epidemic relax, the focus will shift to supporting the recovery of output and employment growth.
The new crown epidemic has severely impacted the global economy, and the Bank of Canada has taken unprecedented measures to maintain the normal operation of financial markets. In the past three months, policy makers have cut interest rates by 150 basis points to a record low of 0.25%.
The Bank of Canada also expanded its balance sheet to CAD 464 billion (US$ 343 billion), almost quadrupling. Since the beginning of the year, the Bank of Canada has purchased federal and upgraded government bonds and corporate bonds as part of its first attempt at quantitative easing policies.
Canada’s balance sheet GDP has increased from 5% to 20% of pre-crisis. Although the figure is still lower than the levels of the Federal Reserve, the Bank of Japan and the European Central Bank, the expansion of the balance sheet is the fastest among the major economies in the world. of.
Mark Chandler, head of fixed income research at Royal Bank of Canada, predicts that by this time next year, the balance sheet will expand to between 24% and 32% of GDP. He said: “According to the most optimistic estimate, the balance sheet size will fall back to about 15% of GDP in two years.”
The Bank of Canada has emphasized that the bank has the ability to expand the volume and scope of the volume, but economists are eager to hear more details about the possible impact of the expansion of the volume and when and how to reduce the scale of debt purchases.
Statistics Canada reported last week that Canada’s first-quarter gross domestic product (GDP) contracted by 8.2% year-on-year due to restrictions. The Royal Bank of Canada even said that we are experiencing the most brutal recession in history, and the economy will accelerate its crash in the second quarter, down 40% year-on-year.
But severe pain may also be relieved relatively quickly. The Royal Bank of Canada believes that the annual rates of economic growth in the third and fourth quarters will reach 35% and 9%, respectively. It may take some time to return to the state at the end of 2019, maybe a year or more.
Nova Scotia Bank economist Derek Holt said: “A comprehensive forecast of the Bank of Canada’s policy prospects will not be possible until the bank releases its next monetary policy report in July.”
On Thursday (June 4), Bank of Canada Deputy Governor Toni Gravelle will release an economic development report to the Sudbury Chamber of Commerce in Ontario through a video conference. planning.
Tiff Macklem assumed his new role on Wednesday. Holt wrote: “The new president has profound insights on how to avoid the collapse of the financial system, control financial market risks, appease financial market sentiment, and maintain a dynamic balance sheet.”