Ahead of tonight’s Central Bank of Canada (BOC) policy meeting, rumors that the bank will start reducing its bond purchases are becoming increasingly apparent.
Following indications previously given by the BOC, Governor Tiff Macklem is expected to lower the central bank’s weekly government bond purchases to $ 3 billion, from the current rate of $ 4 billion.
Policymakers may also give an indication of whether they will continue with their stance to maintain interest rates until at least 2023.
However, the current situation of Covid-19 in Canada will likely burden the BOC to make this decision.
Covid-19 cases soared in Canada, overtaking the U.S. in new cases per capita last week. The most populous area in Canada, was under siege with new restrictions imposed on Tuesday.
Meanwhile in Ontario, which also includes Toronto, residents are ordered to ‘sit at home’ and only go out for important purposes until at least May 20.
This widespread restriction is expected to delay recovery and may prevent BOCs from reducing stimuli prematurely.
However, if the BOC reduces its bond purchases, Canada will be the first of the G7 countries to tighten its policy.
