The Bank of Canada is expecting strong consumption-led growth in the second half of the year as vaccinations against COVID-19 continue, Governor Tiff Macklem said on Tuesday.
In comments to the House of Commons finance committee, he reiterated that considerable uncertainty surrounded the central bank‘s forecast that economic slack should be absorbed in the second half of next year.
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The bank signaled last week it could start hiking rates from their record lows in late 2022, as it sharply boosted its outlook for the Canadian economy and reduced the scope of its bond-buying program.
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Macklem said the biggest potential cause of uncertainty was how the coronavirus progressed.
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“This is a bad third wave and we need to get through that … as we can get back to more normal activities, we think consumers, Canadians, are going to go spend money and that will lead the recovery,” he told legislators.
Macklem noted that some sectors had been very badly hit by the pandemic and reiterated that full employment was critical to keeping inflation sustainably at the bank‘s 2 per cent target.