Despite the continuing economic recovery, the Bank of Canada has decided, once again, to keep its key rate at the floor at 0.25%, a value that has remained unchanged since the start of the pandemic in March 2020.
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The Bank justified its decision by pointing to the galloping inflation in the country, the international uncertainties linked to the pandemic, the rise in the cost of energy and the fact that the global supply chain is struggling to replace itself after the disruptions caused by COVID-19, continually leading to shortages of various commodities.
“The Governing Council believes that, given the remaining margin of excess capacity, the economy should continue to receive considerable monetary policy support. We remain committed to maintaining the key rate at its floor value until these excess capacities are absorbed, so that the inflation target of 2% is reached in a sustainable manner, ”she explained in a press release on Wednesday. .
In doing so, the Bank of Canada does not plan to raise its key rate until at least the second or third quarter of 2022.
In addition, the Bank of Canada now expects the Canadian economy to grow 5% in 2021, followed by gains of 4.25% in 2022 and 3.75% in 2023.
“Demand should be supported by strong consumption and business investment, as well as the rebound in exports due to the continuing recovery of the US economy,” she said.
Inflation: return to normal at the end of 2022
In terms of inflation, which reached a record since 2003 in September with a rise in the CPI of 4.4% in Canada and 5.1% in Quebec due to soaring fuel prices, rents and groceries, the Bank expects a return to normal at the end of 2022.
“The Bank now expects CPI inflation to be high through the next year, and gradually to fall back to around the 2% target at the end.” of 2022 ”, it was indicated.