BoC's Lane: Q2 Canadian GDP to plunge between 15% and 30% from late-2019 level


The bank of Canada (BoC) expects the GDP to contract by anywhere between 15% and 30% from late-2019 level, BoC's Deputy Governor Timothy Lane said on Wednesday.

Additional takeaways

"On balance, there is likely to be downward pressure on inflation once coronavirus shutdown ends."

"We are likely to emerge with demand and supply weaker than before; scarring associated with shutdown could lower productivity, which tends to result in higher inflation."

"Bank's analysis though suggests the decline in demand stemming in part from weaker business and consumer confidence is likely to have a larger effect."

"Monetary policy will continue to manage the risk that inflation could deviate persistently from its target in either direction."

"Post-crisis sectoral adjustments are likely to cause damage to Canadian productive capacity that may be profound and long-lasting."

"Standard Consumer Price Index is currently less meaningful, given the drop in gas prices and shifts in spending."

"There is a risk that domestic and global recovery could occur in fits and starts."

"Layoffs are concentrated in the service sector, where during normal times labor mobility is high."

"One new challenge facing bank is a sizable increase in financing needs by federal and provincial governments coinciding with heightened credit needs of the private sector."

Market reaction

The USD/CAD pair recovered slightly from session lows and was last seen losing 0.27% on the day at 1.3905.

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