The Bank of Canada (BOC) is expected to be more cautious and will not make any changes in its monetary policy at tonight’s policy meeting.
BOC had previously announced a stimulus reduction in July, reducing its asset purchases by C $ 1 billion to C $ 2 billion per week.
However since then, the situation in Canada has deteriorated. Not only is the country struggling with an increase in Covid-19 infections, but it is also impacted by political instability ahead of federal elections in the middle of this month.
Although the vaccination rate in the country is high, but the cases of coronavirus infection also show an increase to more than 3,000 a day.
This indirectly weakened the outlook for economic recovery in the country, moreover the gross domestic product (GDP) data in the second quarter was reported to have contracted this year by 1.1%.
Meanwhile, Prime Minister Justin Trudeau has announced elections will be held on September 20 to find a new mandate to tackle the Covid-19 crisis.
Both of these factors increase the likelihood that policymakers will maintain the current approach in their monetary policy.
The BOC meeting to be chaired by Governor Tiff Macklem is expected to leave interest rates unchanged at 0.25% and keep government bond purchases at the current rate of C $ 2 billion per week.
At the time of writing, the Canadian dollar is down lower against the strong US dollar, with it trading around the price of 1.26800.
