The Bank of Canada kept its benchmark interest rate steady at 0.25 per cent on Wednesday, noting that while the economy is improving in line with vaccinations, the threat of further coronavirus variants makes the recovery uncertain.
Canada’s central bank said that it has no plans to raise its benchmark interest rate, known as the target for the overnight rate, until Canada’s inflation rate shows signs of remaining at around two per cent.
Official data shows the inflation rate is currently at its highest level in a decade at 3.4 per cent, but the bank believes the spike is only temporary and will return to a more normal range once “transitory” imbalances in things like supply and demand for consumer goods, shipping bottlenecks and a global shortage of semiconductors level off.
“In the Bank’s July projection, this happens sometime in the second half of 2022,” the bank said. “The global economy is recovering strongly from the COVID-19 pandemic, with continued progress on vaccinations, particularly in advanced economies. However, the recovery is still highly uneven and remains dependent on the course of the virus.”