Question Period Note: Bank of Canada Monetary Policy Report for October 2020

• The Bank of Canada released its Monetary Policy Report (MPR) today, providing an updated view on the global and Canadian economies.
• Overall, the recoveries are proceeding largely as envisioned in July, with global and Canadian growth paths shifting to markedly slower paces after initial rebounds when containment measures were lifted.
• The recoveries are partial and advancing in highly uneven ways, however. This is expected to keep both global and Canadian inflation pressures in check.

• The Bank of Canada has revised up its outlook for the Canadian economy in 2020 on stronger than expected recovery.
• Still, the economy is a long way from a full recovery, and many Canadians and businesses continue to face serious hardship as a result of the crisis.
• With the largest peacetime investment in Canada's history, the Government is continuing to take strong, immediate, and effective action to protect Canadians and our economy from the impacts of the pandemic.
• The Government will provide a revised economic and fiscal outlook in the fall.

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IN-BRIEF
• The Bank expects Canada’s economy to contract by 5.7% in 2020 before growing by 4.2% in 2021. The immediate boost from the reopening of economies occurred sooner and stronger than expected, leading to a 2 percentage point upward revision to the size of Canada’s contraction in 2020 compared to the July MPR.
• The October MPR marked a return to a traditional outlook for the economy and inflation, as opposed to possible scenarios amid unprecedented uncertainty. That said, the projections remain highly conditional on the course of the virus.
• Along its recovery path, the Bank expects Canadian growth to be choppy, owing to localized outbreaks and highly uneven impacts on sectors and vulnerable groups. The Bank anticipates that fiscal policy will continue to provide important support to the economy over the recovery. With potential output being revised down as a result of long-term scarring effects from the pandemic, slack in the economy is not expected to close until 2023.
• For inflation, the dramatic decline in gasoline prices in the spring will hold inflation down until early 2021. Beyond this timeframe, inflation should pick up but is expected to be below target in 2021 and 2022 as a result of ongoing slack.