Bank of Canada holds policy rate at 0.25%
The bank of Canada Wednesday announced it will be holding it’s overnight rate of 0.25% and stated that it will continue the reinvestment phase of its balance sheet by maintaining its holdings of Government of Canada bonds.
On the economic outlook, the Bank noted that “GDP growth in the second half of 2021 now looks to have been even stronger than expected. The economy entered 2022 with considerable momentum, and a broad set of measures are now indicating that economic slack is absorbed. With strong employment growth, the labour market has tightened significantly. Job vacancies are elevated, hiring intentions are strong, and wage gains are picking up.”
On the impact of omicron, the Bank of Canada stated, “it is expected to be less severe than previous waves. Economic growth is then expected to bounce back and remain robust over the projection horizon, led by consumer spending on services, and supported by strength in exports and business investment.”
The Bank acknowledged the high level of consumer price inflation, stating that “persistent supply constraints are feeding through to a broader range of goods prices and, combined with higher food and energy prices, are expected to keep CPI inflation close to 5% in the first half of 2022. As supply shortages diminish, inflation is expected to decline reasonably quickly to about 3% by the end of this year and then gradually ease towards the target over the projection period.”
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