Taper Time: Bank Of Canada Scales Back Asset-Purchasing Program

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On the latest edition of Market Week in Review, Director and Senior Portfolio Manager Megan Roach and Senior Research Analyst Brian Yadao discussed recent economic data releases from the U.S. and the UK, as well as key central bank announcements. They also provided an update on the first-quarter earnings season and recent global equity-market performance. 

U.S. jobless claims fall again, while UK retail sales soar

The week of April 19 was marked by positive economic news in both the U.S. and the UK, Roach said. In the U.S., weekly initial jobless claims dropped more than expected for the second straight week, falling to 574,000, she noted. “This is slightly less than the 576,000 claims reported in the previous week, and marks a new pandemic-era low,” Roach remarked, adding that the decline is a strong indicator of an improving labor market. Adding to the good news, an index of leading U.S. economic indicators from the Conference Board rose 1.3% during March, reversing a 0.1% decline from February, she said.

Meanwhile, the unemployment rate in the UK came in better than expected, falling to 4.9% in the December-through-February timeframe, Roach stated. In addition, UK retail sales rocketed higher in March, rising more than 5% from February. “This crushed consensus expectations for a 1.5% increase,” Roach noted, “and is another indication that things are starting to return to a more normal state.”

Bank of Canada announces reductions in weekly bond purchases

Turning to monetary policy, Roach noted that both the European Central Bank (ECB) and the Bank of Canada held meetings the week of April 19. “The ECB meeting was the less exciting of the two, with the central bank leaving interest rates and its asset-purchasing program unchanged,” she said.

The Bank of Canada (BoC), on the other hand, garnered headlines by becoming the first major central bank this year to make reductions to its accommodative monetary policy, Roach noted. “On April 21, the BoC announced that it will scale back its weekly debt purchases from C$4 billion to C$3 billion,” she stated, adding that the BoC left its key interest rate unchanged at 25 basis points for now.

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