The Bank of Canada (BoC) is holding the overnight rate at 0.25%, it announced today, but economists say an increase is imminent.
The central bank pointed to concerns about the Omicron variant stifling economic growth in 2022’s first quarter, but said it anticipates this wave will have less of an impact than previous ones.
“Economic growth is then expected to bounce back and remain robust over the projection horizon, led by consumer spending on services, and supported by strength in exports and business investment,” the BoC said in its statement.
In a note to investors, Central 1 economist Bryan Yu said, “Underlying the decision was an upbeat assessment of the economy despite the Omicron variant. Mixed economic conditions persist globally, but the U.S. economy is expanding at a robust pace while oil prices have rebounded. This is contributing to rate normalization globally.
“That said, it all but guaranteed a hike at the next rate meeting set for March 2 as it removed its forward guidance.”
Supply constraints and higher food and energy prices will keep CPI inflation near the 5% mark in the first half of the year, the BoC said. But this growth won’t persist in the second half of 2022.
“As supply shortages diminish, inflation is expected to decline reasonably quickly to about 3% by the end of this year and then gradually ease towards the target over the projection period.
“Overall, the bank projects global GDP growth to moderate from 6¾ % in 2021 to about 3½ % in 2022 and 2023.”
The next rate announcement is set for March 2.