The Bank of Canada announced on Wednesday that it was keeping its key interest rate at 0.25%, noting that inflation now seemed more powerful and persistent than expected.
The central bank also announced that it was ending its quantitative easing program, which consisted of stimulating the economy by buying government bonds.
The bank now expects annual inflation to average around 4.75% through the end of 2021.
This acceleration in inflation is fueled by global forces that have created bottlenecks in supply chains, increasing costs for businesses and limiting the supply of goods in high demand.
These forces are also acting on economic growth, which has recently gained a boost with the easing of health restrictions and a rebound in consumer spending.
The Bank of Canada has downgraded its growth forecast for the Canadian economy this year. It now expects an increase of 5.1%, compared to 6.0% in its previous forecasts. In addition, economic growth is expected to stand at 4.3% next year, while the central bank previously forecast a 4.6% increase for 2022.
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