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Bank of Canada key interest rate remains at 0.25 per cent

Last Updated Sep 8, 2021 at 7:23 am PDT

The Bank of Canada in Ottawa on Tuesday, Dec. 15, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Summary

Bank of Canada says it continues to expect the economy to strengthen in the second half of the year

Fourth wave of COVID-19 infections and supply bottlenecks could weigh on recovery

Bank of Canada repeats commitment to hold trendsetting rate at near-zero until economy is ready to handle increase

The Bank of Canada has done the expected, keeping its benchmark overnight interest rate where it has been since March 2020.

The move was first made to keep the interest rate at 0.25 per cent as the COVID-19 pandemic forced mass businesses closures, derailing economies across Canada and the world.

In announcing its decision, the Bank of Canada repeated its commitment to hold its trendsetting rate at near-zero until the economy is ready to handle an increase in rates, which it doesn’t expect to happen before the second half of 2022.

The central bank is also maintaining its quantitative easing program at a target pace of $2 billion per week.

The bank says it continues to expect the economy to strengthen in the second half of the year, although the fourth wave of COVID-19 infections and supply bottlenecks could weigh on the recovery.

The central bank noted that inflation remains above three per cent as expected, boosted by base-year effects, gasoline prices, and pandemic-related supply bottlenecks.

However, it says the factors pushing up inflation are expected to be transitory, but their persistence and magnitude are uncertain and will be monitored closely.