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Bank of Canada sees economy strengthening as inoculations pick up

Kitco News

OTTAWA (Reuters) - Canada’s economy will see a solid rebound in coming months as COVID-19 restrictions are loosened, and an expected ramp-up in vaccination is boosting confidence in sustained strong growth into 2022, Bank of Canada Governor Tiff Macklem said on Tuesday.

Macklem said that as more Canadians are inoculated, the hardest-hit segments of the service industry will be able to begin resuming operations, resulting in strong job growth.

“We expect a solid rebound in the immediate months ahead ... with vaccinations expected to ramp up, we can be more confident in sustained strong growth through the second half of the year and into next year,” he told an Alberta business audience.

But Macklem said it would be “some time” before Canada saw a full recovery, noting the pandemic had accelerated a trend toward automation, with many low-wage jobs at high risk of being affected.

He also pointed to a “likely permanent” trend toward e-commerce, predicting the economy may need “significantly fewer” retail workers.

“We are not returning to the same economy we had before the pandemic. Even as it recovers, the economy is adapting to structural changes, and some workers will need to shift to jobs in faster-growing sectors,” he said.

Macklem said that while the forces of digitization and automation will ultimately be positive for the labor market, in the near term they will do little to help those most affected by the pandemic.

“We all have a shared responsibility to get Canadians back to work,” he said, urging workers to consider their own skills and training needs.

Macklem reiterated interest rates would remain at their effective lower bound until economic slack is fully absorbed, which the bank says should occur in 2023.

The Canadian dollar steadied at about 1.2595 per U.S. dollar, or 79.40 U.S. cents, after the speech, near a three-year high.

Additional reporting by Fergal Smith in Toronto; editing by Jonathan Oatis

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