The Bank of Canada (BOC) decided to keep the overnight interest rate unchanged at 0.25% as expected. Bank rates and deposit rates were maintained at 0.50% and 0.25%, respectively. This indicates that the indicators presented earlier will remain in place, namely that an increase in interest rates is likely to occur in the second half of 2022.
The central bank is also continuing to reduce its weekly asset purchase target from 3 billion Canadian dollars to 2 billion Canadian dollars. The adjustment was made based on the Central Bank’s recovery and confidence in Canada’s economic prospects.
With the contagion of 3rd wave Covid-19 declining, the BOC expects economic growth to grow at a rate of 6% in 2021. This reading is slightly lower than the projection released in April.
On inflation, high petrol prices with difficulties in continued supply carry an indication that the inflation rate will be above 3% before dropping to 2% in 2022.
The CAD currency depreciated following the report with USD/CAD strengthening 0.03% to the level of 1.2514.
