Ottawa, March 10 (AFP/APP): Canada’s central bank on Wednesday held its key lending rate at 0.25 percent, saying the economy still needs a boost despite an unexpected recent uptick leading to improved forecasts.
The Bank of Canada said the Canadian economy proved “to be more resilient than anticipated to the second wave of the (Covid-19) virus and the associated containment measures.”
As a result, the bank said it now expects growth in the first quarter to be positive rather than negative as it had forecast in January. The central bank, however, said it would still likely maintain record low interest rates until 2023. It said it will also continue its unprecedented quantitative easing program — buying up Can$4 billion (US$3.1 billion) in longterm securities from the open market per week in order to increase the supply of money and encourage lending and investment.
The bank said the global economy is recovering from the pandemic’s effects but it is uneven across regions and sectors. Canadian consumers and businesses, it said, have mostly adapted to Covid-19 containment measures, the housing market has been much stronger than anticipated, and improving foreign demand and higher commodity prices have “brightened the prospects for exports and business investment.”
Despite this rosier near-term outlook, the bank warned there remains “considerable economic slack and a great deal of uncertainty about the evolution of the virus and the path of economic growth.” Employment, it noted, is still below pre-pandemic levels, with low-wage workers, young people and women having borne the brunt of job losses.
“The spread of more transmissible variants of the virus poses the largest downside risk to activity, as localized outbreaks and restrictions could restrain growth and add choppiness to the recovery,” it added. Inflation is currently near the bottom of the bank’s one-to-three percent target range, but is likely to hit the top level in the next few months before retreating.
This expected rise, the bank said, follows deep price declines in some goods and services at the onset of the pandemic last year.
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