What To Expect Out Of Bank Of Canada Interest Rate Decision

It appears that the bond markets are expecting an announcement of the CAD1.0B taper to reach CAD3.0B in three months. If the taper is more than that, we could see a stronger loonie.

And if the BOC doesn’t announce a taper, we’d probably see a weaker loonie.

The environment to predict a trend

Though it should be pointed out that there already is a bias towards the upside for the Canadian dollar.

Commodity prices remain high, and the vaccine rollout is going better than initially expected. The BOC and Canadian government both recently increased their economic forecasts for the year, expecting to avoid a second recession despite the recent lockdown in Ontario.

So, a larger taper than expected might be in line with the outlook, so will have a smaller impact on the markets.

That said, if the BOC doesn’t taper, it might come as a shock to the system. They are already cutting back on their holdings, even though they haven’t officially announced a policy change.

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