The central bank adopts a hawkish bias and said “the Governing Council expects interest rates will need to increase, with the timing and pace of those increases guided by the Bank’s commitment to achieving the 2% inflation target.”
The reinvestment phase of bond holdings will continue. Holdings of government bonds will be “roughly constant at least until it begins to raise the policy interest rate.”
In the new economic projections, BoC lowered 2022 GDP growth forecasts from 4.3% to 4.0%, and 2023 from 3.7% to 3.5%. BoC said economic impact of Omicron is expected to be less severe than previous waves. “Economic growth is then expected to bounce back and remain robust over the projection horizon, led by consumer spending on services, and supported by strength in exports and business investment.”
CPI forecasts was lowered for 2022 from 4.2% to 3.4%, but kept unchanged at 2.3% for 2023. BoC said, “as supply shortages diminish, inflation is expected to decline reasonably quickly to about 3% by the end of this year and then gradually ease towards the target over the projection period.”
