Interest rates could rise sooner than previously projected
The Bank of Canada's trendsetting policy rate stays at 0.25% but an increase could happen as early as the second quarter of 2022
By Rob Roach, ATB Economics 27 October 2021 1 min read
As per this morning’s announcement,* the Bank of Canada is keeping its trendsetting policy interest rate at the effective lower bound of 0.25 per cent.
Despite some pundits and investors predicting a series of interest rate hikes starting as early as January, the Bank’s news release says it remains “committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed” and that it doesn’t see this happening until “sometime in the middle quarters of 2022.”
On the inflation front, “the Bank continues to expect CPI inflation to remain elevated in the first half of 2022 and ease back towards 2% in the second half of the year.”
Notably, the Bank did not refer to the currently high rates of inflation as “temporary,” but instead said it “is closely watching inflation expectations and labour costs to ensure that the forces pushing up prices do not become embedded in ongoing inflation.”
*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 January 26, 2022.
Answer to the previous trivia question: According to the International Energy Agency, Global natural gas production in 2020 fell by 2.5%, down to 4,014 billion cubic metres, its first decline since the financial crisis of 2009.
Today’s trivia question: When was the oldest surviving bank founded?