indicatorThe Owl

Bank of Canada tees up March rate increase

Policy interest rate stays at 0.25% for now

By Rob Roach, ATB Economics 26 January 2022 1 min read

Investors, consumers, economists and business owners are wondering when—and how high—the Bank of Canada will raise interest rates to help cool inflation. Those who thought the Bank would pull the trigger today were wrong, but not far off.

As per this morning’s announcement,* the Bank is keeping its trendsetting policy interest rate at the effective lower bound of 0.25 per cent.

What’s changed is that the Bank has “decided to end its extraordinary commitment to hold its policy rate at the effective lower bound." It’s not a certainty, but this opens the door for a rate increase on the next announcement date of March 2.

The Bank expects inflation to be “close to 5% in the first half of 2022,” but then “decline reasonably quickly to about 3% by the end of this year and then gradually ease towards the [2%] target.”

*Each year, the Bank of Canada sets eight fixed dates on which it announces whether or not it will change its policy interest rate. The next announcement is scheduled for March 2, 2022.

Answer to the previous trivia question: There are 12 Federal Reserve Banks in the U.S. Federal Reserve System. Pursuant to the Federal Reserve Act, each of the 12 Reserve Banks is separately incorporated and has a nine-member board of directors. 

Today’s trivia question: How many people sit on the Bank of Canada’s board?

After spiking 3.4% in October, seasonally adjusted retail sales in Alberta edged up 0.1% in November

The Bank of Canada has kept its policy interest rate at 0.25%

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