Bank of Canada monetary policy report.
LINK to the MPR from the Bank of Canada
Overview of the Monetary Report:
The COVID-19 pandemic has caused a worldwide health-care emergency as well as an economic calamity. Both are on a scale few have seen in their lifetime. The virus has spread broadly and rapidly, and to contain it, governments introduced public health measures that curtailed economic activity. The virus, combined with these necessary measures, has brought about the steepest and deepest economic decline since the Great Depression. Virtually every aspect of the Canadian and global economies has been affected, causing widespread losses in jobs and business incomes.
The course of the pandemic is inherently unknowable, and its evolution over time and across regions remains highly uncertain. New cases of the virus are now at very low levels in China, but many other emergingmarket economies (EMEs) are now seeing their number of new cases increase rapidly (Chart 1). Some advanced economies that were hard-hit at the outset have slowed the rise in new cases and are reopening their economies. In the United States, infections have reached new highs. Globally, hundreds of thousands of lives have been lost.
In Canada, the number of new COVID-19 cases has fallen sharply from its April high, and the economic recovery has begun in all provinces and territories and across many sectors. Consequently, economic activity is picking up notably as measures to contain the virus are relaxed. This is a welcome sign.
The Bank of Canada expects a sharp rebound in economic activity in the reopening phase of the recovery, followed by a more prolonged recuperation phase, which will be uneven across regions and sectors (Figure 1). As a result, Canada's economic output will likely take some time to return to its pre-COVID-19 level. Many workers and businesses can expect to face an extended period of difficulty.
A central scenario is provided rather than a projection
The economic outlook is extremely uncertain, largely because of the unpredictable course of the virus. Reflecting this, the July Monetary Policy Report provides a central scenario for the economy rather than the usual economic projection.
The central scenario is informed by the Bank's analysis and tries to balance the likelihood of better and worse scenarios, but it is highly conditional on our assumptions about the virus. In particular, the central scenario assumes the following:
- there will not be a broad-based second wave of the pandemic in Canada or globally;
- most large-scale containment measures will be gradually lifted; and
- the pandemic will have largely run its course by mid-2022, likely because of the widespread availability of a vaccine or effective treatment.
In addition to the fundamental uncertainty about the course of the virus,
there is also considerable uncertainty about its impacts. In particular, there
is not enough information to estimate how deeply the economy may be
scarred from business closures or massive job losses. Further, once supply
is restored, it is unclear how quickly demand will recover because people
may have changed their priorities, work patterns and social behaviours as a
result of the pandemic.
