Bank of Canada maintains interest rate: Read the official statement

Holds index at 0.25 percent

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The following is the official statement of the Bank of Canada’s interest rate decision on Wednesday, October 27, 2021:

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The Bank of Canada today held its target for the overnight rate at the effective lower limit of ¼ per cent, with the Banking Rate at ½ per cent and the deposit at ¼ per cent. The extraordinary prior guidance of the Bank on the road for the night rate is preserved. The Bank ends quantitative easing (QE) and moves into the reinvestment phase, during which it will buy Government of Canada Bonds only to replace maturing bonds.

The global economic recovery from the COVID-19 pandemic is progressing. Vaccines prove very effective against the virus, although their availability and distribution worldwide remain uneven and COVID variants present risks to health and economic performance. In the face of strong global demand for goods, pandemic-related disruptions to production and transportation limit growth. Inflation rates have risen in many countries, bolstered by these supply bottlenecks and by higher energy prices. While bond yields have increased in recent weeks, financial conditions remain accommodative and continue to support economic activity.

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The Bank predicts that global GDP will grow by 6½ percent in 2021 – a strong pace but slower than projected in the July Monetary Policy Report (MPR) – and by 4¼ percent in 2022 and around 3½ percent in 2023.

In Canada, robust economic growth resumed, after a pause in the second quarter. Strong employment gains in recent months have been concentrated in hard-to-reach sectors and among workers hardest hit by blockchain. This has significantly reduced the very uneven impact of the pandemic on workers. As the economy reopens, workers need time to find the right jobs and employers to hire people with the right skills. This contributes to labor shortage in some sectors, even when relaxation remains in the general labor market.

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The Bank now forecasts that Canada’s economy will grow by 5 per cent this year before moderating to 4¼ per cent in 2022 and 3¾ per cent in 2023. Demand is expected to be supported by strong consumption and trade investment, and a rebound in exports while the U.S. economy continues to thrive. to recover. Residential activity has moderated, but is expected to remain elevated. On the supply side, lack of factory inputs, transportation bottlenecks, and difficulties in matching jobs to workers limit the productive capacity of the economy. Although the impact and persistence of these supply factors are difficult to quantify, the output gap is likely to be narrower than the Bank predicted in July.

The recent rise in CPI inflation was forecast in July, but the main forces driving up prices – higher energy prices and pandemic-related stockpiles – now appear to be stronger and more persistent than expected. Core measures of inflation have also risen, but less than the CPI. The Bank now expects CPI inflation to rise in the next year, and will calm to around the 2 percent target by the end of 2022. The Bank is closely monitoring inflation expectations and labor costs to ensure that the temporary forces that drive up prices, will not go inside. continued inflation.

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The Governing Council considers that due to continued overcapacity, the economy continues to require considerable monetary policy support. We remain committed to keeping the political interest rate at the effective lower limit until economic easing is absorbed so that the 2-percent inflation target is sustainably achieved. In the Bank’s projection, this happens sometime in the middle quarters of 2022. In light of the progress made in the economic recovery, the Governing Council has decided to put an end to quantitative easing and keep its Government of Canada general assets bonds approximately constant. .

We will continue to provide the appropriate degree of monetary stimulus to support the recovery and achieve the inflation target.

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