Making sense of the markets this week: July 19, 2021
Given the widespread confidence in economic recovery, the bank will also ease up on its quantitative easing (QE) program. That is, they will ease upon or taper their bond-buying practice; it’s being adjusted to a target pace of $2 billion per week, down from $3 billion.
A few weeks ago we looked at QE and the taper tantrum that stock markets might throw.
“‘With cases falling, rapid progress on vaccinations and easing containment measures, the governing council is increasingly confident that growth will rebound strongly as the economy once again reopens, and this time growth will be more durable,’ bank Governor Tiff Macklem said in a news conference.”
The bank also raised its own inflation expectations. Bank analysts now see inflation to remain above 3% for the remainder of 2021. They see another slight increase in 2023 before inflation settles back to that 2% target range in 2024. But Macklem acknowledged inflation is expected to remain above target (2%) for several years.
Recently, inflation in Canada has been warming up, with an annual rate of 3.6% in May and 3.4% in April.
The bank will keep an eye on employment. They seek to stimulate or enable a very inclusive labour market recovery, having stated it may be their most important end goal.
In this space we’ve often discussed how the pandemic picked on the weak, both physically and economically. Macklem pointed to a Statistics Canada report that showed the economy added 230,700 jobs in June. We need another 550,000 jobs to return to pre-pandemic employment levels.
That might be possible as more restrictions are lifted across the country. In Ontario, on July 16, most everything opened, including indoor dining.