Today the Bank of Canada held its last scheduled announcement of the year, suggesting no changes to its forecast that its policy rate will increase in the middle of 2022.
The central bank stated that while it was “closely watching” the inflation problem that has controlled headlines recently, it would hold its benchmark rate stable at 0.25%, with rate hikes most likely to start sometime around the middle of next year.
In its statement, the bank said that development in Canada’s economy had been “as expected” in the 3rd quarter, around 5.5%, with a rebound in higher vaccination rates adding to that spurt.
It stated CPI (customer price index) inflation would likely stay “elevated” through the first 6 months of next year before dropping to the bank’s target of around 2% in the second half.
While the bank stated the economy had “considerable momentum” heading into the 4th quarter, they kept in mind the brand-new Omicron variation of COVID-19 as a reason for some uncertainty, which ultimately led to tightened travel limitations in numerous nations and decreases in oil prices.
The statement included that while real estate activity had been moderating, the resale market gained strength. Still, it stressed that current flooding in British Columbia and the introduction of the Omicron variation might have an unfavourable effect on development by “compounding supply chain disruptions and reducing demand for some services.”
In a Financial Times op-ed, Tiff Macklem, the bank’s governor, indicated that the benchmark rate is “getting closre”. Despite inflation having just recently struck its highest mark in two years, Macklem said that the bank’s could manoeuvre around the issue if needed.
“What our resolve does mean is that if we end up being wrong about the persistence of inflationary pressures and how much slack remains in the economy, we will adjust,” he said. “Our framework enables us to do just that.”