NEW YORK (MaceNews) – Bank of Canada Governor Tiff Macklem repeated Thursday the bank will keep its extraordinary monetary policy measures in place, and will calibrate its asset purchases as needed to support the recovery and meet its inflation target.
Echoing language from the bank’s Wednesday policy announcement when policy-makers kept rates on hold, Macklem said the bank will keep its policy rate at the effective lower bound “until economic slack is absorbed so that the inflation target is sustainably achieved.”
“To reinforce this commitment and keep interest rates low across the yield curve, the bank is continuing its large-scale asset purchase program at the current pace,” Macklem said in remarks for delivery to the Canadian Chamber of Commerce.
“This QE program will continue until the recovery is well underway and will be calibrated to provide the monetary policy stimulus needed to support the recovery and achieve the inflation objective,” he said.
Macklem said the recovery has been better than expected, with support from pent-up household spending, especially on goods and housing, in addition to exports. Still, policy-makers do not expect the economy to sustain the third-quarter pace.
“Despite this good news, the members of Governing Council still expect the recuperation phase to be slow and choppy,” Macklem said.
“We don’t expect the strong rebound we’ve seen to continue at the same pace in the months ahead. Business confidence and investment remain subdued. More fundamentally, uncertainty about the future course of the pandemic will continue to restrain the economy, particularly in sectors that involve close contact.”
Macklem repeated the bank’s pledge to use its policy tools to meet its inflation goals.
“With CPI inflation close to zero, and downward pressure coming from energy prices, travel services and economic slack more generally, we expect inflation to stay well below the 2 percent target in the near term,” he said.
“Our core measures of inflation have drifted slightly lower, consistent with the unused capacity in the economy. So, we agreed that as the economy shifts from reopening to recuperation, it will continue to need extraordinary monetary policy support.”