By Elishya Perera
VANCOUVER, B.C. (CWBN)_ The Bank of Canada (BoC) has decided to maintain interest rates at historic lows, until inflation gets back to two per cent, something that isn’t likely to happen until 2023.
The central bank announced yesterday (Oct 28), that it has decided to keep its overnight rate at 0.25 per cent, until economic slack is absorbed and the inflation target is sustainably achieved. The bank has also pledged to buy a minimum of US$3.8 billion a week in government bonds under its quantitative easing program.
Although the economy of Canada is showing signs of recovery from the impact of the pandemic, things are still far from normal. Therefore, these measures taken by the central bank has played a significant role in assisting the nation to emerge more quickly than expected from the worst of the economic crisis.
According to BoC, Canada’s economy is expected to shrink by 5.7% this year, but grow by 4.2% next year, and 3.7% in 2022. Meanwhile, inflation in the country is expected to be 0.6% this year, 1.0% next year, and 1.7% in 2022.
However, these growth and inflation projections are based on two assumptions; there won’t be a second or third widespread lockdown in Canada, and a vaccine or some sort of effective treatment will be widely available by the middle of 2022 at the latest.
Unfortunately, Canada is already experiencing the second wave of the virus, which has led to partial lockdowns, hindering any form of economic recovery that was underway following the first wave back in May and June.
“Before, we were trying to flatten the curve of new COVID cases. Now, it’s a case of COVID flattening the recovery,” Pedro Antunes, the chief economist of Conference Board of Canada said.
