OTTAWA: The Bank of Canada on Wednesday held its key lending rate at a low of 0.25 percent, but warned it could start increasing it sooner than previously announced—as early as next year.
The central bank cited a stronger economic rebound than expected in its January monetary report, with the Canadian economy now forecast to grow 6.5 percent in 2021 (revised up from four percent), moderating to around 3.75 percent in 2022 and 3.25 percent in 2023, reports AFP.“The outlook has improved for both the global and Canadian economies,” the bank said in a statement. “Activity has proven more resilient than expected in the face of the Covid-19 pandemic, and the rollout of vaccines is progressing.”
A number of regions around the world, including parts of Canada, however, are experiencing “a difficult third wave of infections and lockdowns,” it added.
The more contagious variants of the virus are straining health care systems and have introduced “a new dimension of uncertainty,” with new lockdowns ordered by public health authorities threatening to upend recent progress.
The economic recovery, the bank stressed, remains “highly dependent” on the pace of Covid inoculation programs.
As vaccines roll out and the economy reopens, consumption is expected to rebound strongly in the second half of this year, it said.
An additional Can$101 billion (US$81 billion) in government pandemic aid announced in the federal budget this week will also “contribute importantly to growth.”The bank noted that economic growth and job gains in the first quarter were strong, and that a massive stimulus and rapid vaccine rollout in the United States has helped Canada’s top trading partner quickly get back on its feet.