BOC remained positive about the economic outlook despite recent softer data. The members viewed that weakness in the job market was temporary. Meanwhile, they were more attentive to the rise in core inflation. We believe the plan of QE tapering remains intact while the central bank is still on the way to hike the policy rate in late-2022.

There were a few changes in the policy statement. On economic developments, policymakers acknowledged that domestic economic developments “have been broadly in line with the outlook in the April Monetary Policy Report (MPR)”. They also acknowledged the “renewed lockdowns associated with the third wave are dampening economic activity in the second quarter”, noting these were largely anticipated. These reveal that the members have looked through the uptick in the unemployment rate and the weaker-than-expected GDP data in 1Q21 released after the April meeting.