The canadian press
The Bank of Canada kept its key interest rate on hold on Wednesday as it said the country’s economy would not fully recover what was lost by COVID-19 before 2022, with the route to getting there depending on the trajectory of the pandemic
In July, the Bank of Canada said it believed the country had been spared a worst-case scenario
The bank’s updated outlook in its monetary policy report indicates that the summer’s rebound was stronger than expected, with the country reversing about two-thirds of the decline seen in the first half of the year
Officials estimate the economy will shrink 57 percent this year, but grow 42 percent next year, and 37 percent in 2022
The report also says the country’s inflation barometer, Statistics Canada’s Consumer Price Index, will remain below the bank’s 2% target until 2022.
The report forecasts annual inflation at 06% this year, 10 percent next year, and 17% in 2022
Governor Tiff Macklem has said the bank will keep its key rate as low as it can go to 025% until the economy recovers and inflation returns to target
The bank kept its overnight rate target at 025% on Wednesday, but announced plans to buy more longer-term bonds because these have « a more direct influence on rates. largest loans for households and businesses «
The growth and inflation projections mark a return to the bank’s usual practice of giving a longer view of the economy in its quarterly report on monetary policy
The report says the six months of experience with containment measures and support programs, as well as more insight into medical developments such as vaccines, have given the bank a better basis to establish a baseline forecast.
The bank’s outlook rests on two major assumptions: that widespread lockdowns will no longer be used and that an effective vaccine or treatment will be widely available by mid-2022.
The country has recovered about two-thirds of the three million jobs lost in March and April Emergency federal aid has replaced lost wages for millions of workers and provided loans and wage subsidies to struggling businesses. p>
Recovery from decline earlier this year has been patchy, report notes Hardest-hit sectors, such as food and beverage, travel and accommodation, lag behind
Workers in these sectors, as well as young people and low-wage workers, continue to face high unemployment rates, report says
All could again be hit hard by new rounds of restrictions, report notes Some regions of the country have already imposed such public health restrictions in the face of rising COVID-19 cases
« The scale and intensity of the reimposed containment measures, including impacts on schools and the availability of child care services, could lead to setbacks, » the report says.
« Long breaks in employment can have long-term effects on the income prospects of vulnerable groups »
Report says government assistance has played a key role in providing a financial lifeline to individuals and businesses
Changes to EI and new benefit programs will increase household disposable income, the officials write, adding that the bank expects government assistance « to provide significant support to the economy while throughout the recovery
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Bank of Canada – Bank of Canada, Central Bank, monetary policy, interest rates
News from the world – CA – Bank of Canada keeps rate stable, says COVID -19, an economic recovery likely by 2022
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