Bank of Canada: No Change to Rate

Date Posted: October 27, 2021

In the latest release, the Bank of Canada has opted to maintain it’s benchmark rate at 0.25%, the same level it has been since the start of the pandemic in March 2020.

The Bank has stated that they are ending the quantitative easing (QE) efforts and are moving into the reinvestment phase. Despite progression in global economic recovery, pandemic related disruptions to production and transportation are hindering growth.

“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.”

Canada’s own economic growth has resumed with strong employment gains in sectors for those most affected by lockdowns. However, it is taking more time for workers and employers to find the right job and applicants thus contributing to labour shortages in certain sectors.

“The Bank now forecasts Canada’s economy will grow by 5 percent this year before moderating to 4¼ percent in 2022 and 3¾ percent in 2023. Demand is expected to be supported by strong consumption and business investment, and a rebound in exports as the US economy continues to recover. Housing activity has moderated, but is expected to remain elevated. On the supply side, shortages of manufacturing inputs, transportation bottlenecks, and difficulties in matching jobs to workers are limiting the economy’s productive capacity. Although the impact and persistence of these supply factors are hard to quantify, the output gap is likely to be narrower than the Bank had forecast in July.”

The next Bank of Canada announcement will be the last for 2021 on December 8th. 

To read the full press release from the Bank of Canada, click here.

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