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The decision to again make note of the exchange rate was perhaps the most noteworthy development in the central bank’s stance from its previous deliberations six weeks ago. The meeting will stand as senior deputy governor Carolyn Wilkins’s final contribution to policy, since Dec. 9 marks her final day at the central bank.
Wilkins played a leading role in the most aggressive deployment of monetary policy in the Bank of Canada’s history, dating back to March when policy-makers unloaded the arsenal to offset the economic shock of the COVID-19 pandemic.
The shock-and-awe campaign has subsided, but policy-makers continue to deploy historic levels of stimulus. The Bank of Canada reiterated it would continue to buy Government of Canada bonds at a rate of about $4 billion per week to keep downward pressure on interest rates, and it restated that it will keep the benchmark lending rate pinned near zero until sometime in 2023.
“We remain committed to providing the monetary policy stimulus needed to support the recovery and achieve the inflation objective,” which is an annual increase in the Consumer Price Index of around two per cent, the central bank said.
Policy-makers noted that the inflation measures that they follow to get a read on where prices are headed were all below two per cent, and that “considerable” economic slack is “expected to continue to weigh on inflation for some time.”
The currency’s current level could add to the economic weakness that is offsetting whatever upward pressure on prices could come from COVID-19-related price increases for food and other staples.
