(Ottawa) The Bank of Canada on Wednesday kept its key interest rate at its minimum 0.25%.
In a statement, the central bank said its governing council did not expect to hike its policy rate until the second or third quarter of next year. This projection is the same as the last decision on this subject.
The Bank of Canada has also warned that high inflation will continue to emerge for the first half of next year.
The Bank of Canada has indicated that it will take until the second half of 2022 for inflation to return to the central bank’s comfort zone, which is between 1.0% and 3.0%.
By the end of next year, the bank expects annual inflation to slow to 2.1%.
The Bank of Canada “closely monitors inflation expectations and labor costs to ensure that the forces driving up prices do not ultimately have a lasting influence on inflation.” “She said in a statement.
The announcement, the last of its kind for the central bank this year, comes as several recent indicators point to strong economic activity in the country.
Statistics Canada reported last week that the economy grew at an annualized rate of 5.4% in the third quarter, which is slightly lower than the central bank expected in October.
In its statement, the central bank said growth had reduced economic activity to about 1.5% of its level in the last quarter of 2019, before the arrival of the COVID-19 pandemic.
Likewise, the labor market performed better than expected in November, pushing the proportion of core-aged workers with jobs to an all-time high. The unemployment rate is now only 0.3 percentage point from its pre-pandemic level of February 2020.
Taken together, these data suggest that the economy “boomed considerably at the start of the fourth quarter,” the central bank noted.
Still, the bank noted that headwinds from devastating flooding in British Columbia and some uncertainties over the new Omicron variant of the virus causing COVID-19 “could weigh on growth by exacerbating supply chain disruptions. and reducing the demand for certain services ”.