indicatorThe Owl

Economic outlook has improved: Bank of Canada

The Bank expects the inflation rate to rise, but only temporarily

By ATB Economics 21 April 2021 1 min read

The Bank of Canada announced* this morning it is keeping its trendsetting policy interest at 0.25 per cent.

The Bank has revised the timeline for when a rate increase might occur from 2023 to “some time in the second half of 2022.”

While “the outlook has improved for both the global and Canadian economies,” the Bank still sees “considerable excess capacity” and, as a result, “the recovery continues to require extraordinary monetary policy support.”

Despite the better-than-expected growth in Canada during the first quarter, “new lockdowns will pose another setback and the labour market remains difficult for many Canadians, especially low-wage workers, young people and women.

The Bank expects the inflation rate to rise, but only temporarily due to short-term effects related to the pandemic and higher gasoline prices.

The Bank expects inflation to “ease back toward 2 per cent over the second half of 2021.” Then, as economic “slack is absorbed, inflation should return to 2 per cent on a sustained basis some time in the second half of 2022.”

*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 June 9.

Answer to the previous trivia question: Which source of federal government revenue is larger: personal income taxes or the GST? In fiscal year 2019/20, the federal personal income tax brought in $167.6 billion while the GST generated $37.4 billion.

Today’s trivia question: How many candidates are there on the short-list for the portrait that will appear on the new five-dollar bill?

As of the April 21, 2021 annoucement, the Bank of Canada is keeping its trendsetting policy interest at 0.25 per cent

As of the April 21, 2021 annoucement, the Bank of Canada is keeping its trendsetting policy interest at 0.25 per cent


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