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
The Bank of Canada announced* this morning it is keeping its trendsetting policy interest at 0.25 per cent.
The Bank has, however, changed its mind regarding the timing of future rate increases.
The previous forward guidance provided by the Bank indicated that rate increases would not happen until “some time in the second half of 2022” whereas today’s announcement suggests a rate increase could happen “sometime in the middle quarters of 2022” (i.e. as early as the second quarter of next year).
The Bank has also decided to end quantitative easing and keep its overall holdings of Government of Canada bonds roughly constant.
With regard to rising prices, the Bank expects the inflation rate to go from about 4.75% at the end of 2021 to around 2.0% at the end 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 December 8, 2021.
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