Bank of Canada holds key interest rate, plans for hike in 2022
Posted October 27, 2021 7:12 am.
Last Updated October 27, 2021 10:51 am.
The Bank of Canada is keeping its key interest rate at 0.25 per cent.
The benchmark overnight rate has been held at 0.25 per cent since March 2020, when the COVID-19 pandemic forced mass businesses closures, derailing economies across Canada and the world.
#BreakingNews
Bank of Canada announces end of quantitative easing bond buying program.
-Pulls forward expectations of first interest rate hike into the 1st half of 2022.
-Sees inflation accelerating into early 2022— Mike Eppel (@eppman) October 27, 2021
However, the central bank notes the global economic recovery is progressing, as more vaccines are administered — though it points to uneven distribution around the world and variants continuing to raise concerns.
“In the face of strong global demand for goods, pandemic-related disruptions to production and transportation are constraining growth,” the Bank of Canada said Wednesday. “Inflation rates have increased in many countries, boosted by these supply bottlenecks and by higher energy prices. While bond yields have risen in recent weeks, financial conditions remain accommodative and continue to support economic activity.
The central bank says it will end quantitative easing, meaning it will only be buying Government of Canada bonds to replace maturing ones going forward.
The bank forecasts Canada’s economy will grow by five per cent this year, before moderating in 2022.
It says it sees inflation accelerating into early next year, pulling forward expectations of its first interest rate hike into the first half of 2022. It expects the consumer price index to ease to around the two per cent mark by late next year.
“We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved,” the Bank of Canada said.
“In the Bank’s projection, this happens sometime in the middle quarters of 2022. In light of the progress made in the economic recovery, the Governing Council has decided to end quantitative easing and keep its overall holdings of Government of Canada bonds roughly constant.”
