The Bank of Canada (BoC) has just decided to keep interest rates overnight and at the same time the guidelines set have not changed. Nevertheless, the BoC has warned that the development of the Omicron Covid-19 variant could bring a lot of uncertainty in the country’s economic recovery.
The central bank said in a brief statement released on Wednesday that recent data suggested the economy had strong momentum in the fourth quarter, including broader employment growth thus returning employment rates to pre-pandemic levels.
In addition, the BoC expressed concern about the potential impact of the Omicron variant on future economic growth and warned that recent floods in Western Canada have damaged transportation infrastructure. This can be a factor in restraining economic growth.
“The devastating floods in British Columbia and the uncertainties arising from the Omicron variant could affect growth and lead to supply chain disruptions and reduced demand for some services”. - Central Bank of Canada.
The Bank of Canada has maintained its benchmark overnight interest rate at its lowest level of 0.25% since March 2020, which is at the beginning of the pandemic outbreak in North America. Its latest forecast, published in late October, indicates the key rate is likely to remain at that level until the second or third quarter of 2022. This timeline targets that the economy recovers and the inflation rate declines to a target rate of 2%.
The next central bank interest rate announcement will be made on 26 January. The US dollar traded down 0.01% against the Canadian dollar which traded at 1.2636 following the announcement.
