OTTAWA: Canada's central bank on Wednesday held its key lending rate at 0.25 percent, saying the pandemic continues to take a "severe human and economic toll."
"The earlier-than anticipated arrival of effective vaccines will save lives and livelihoods, and has reduced uncertainty from extreme levels," the Bank of Canada said in a statement."Nevertheless," it added, "uncertainty is still elevated, and the outlook remains highly conditional on the path of the virus and the timeline for the effective rollout of vaccines."
The bank projected improved economic growth, compared to its previous forecast in October, reports AFP.
But in view of near-term weakness and a likely protracted recovery, the bank said the Canadian economy will continue to need a boost, and therefore it said it plans to keep interest rates at record lows until 2023.
The global economic recovery, the central bank noted, has been interrupted by new waves of Covid-19 infections, forcing governments in several countries to reintroduce lockdowns and other measures to slow its spread.
Global growth, it said, is expected to average just over five percent this year and in 2022, before slowing to just under four percent in 2023.
Canada's economy had "strong momentum" through late 2020, but suffered a "serious setback" due to the resurgence of cases and reintroduction of lockdowns, it said.Growth in the first quarter of 2021 is now expected to be negative, followed by a strong second-quarter rebound if public health restrictions are soon lifted.
As parts of the economy reopen and confidence improves, domestic consumption is likely to gain strength, while rising foreign demand buoys exports and business investment.
Beyond the near term, the bank said its outlook is now "stronger and more secure" than its earlier projections.
After a five and a half percent decline in economic activity in 2020, the bank estimates it will grow by four percent in 2021.