The Bank of Canada (BoC) made its eighth scheduled and presumably final interest rate decision for the calendar year. Economists and financial markets were on high alert for signs of changes to come next year and clues as to when.
As expected again no change was made to the benchmark rate. It remains at 0.25% with the prime rate presumably staying at 2.45% at major financial institutions, as has been since March of 2020 when BoC cut their rate three times that month.
Here is a summary of what their current thoughts and findings:
⦁ Inflation is elevated and the impact of global supply constraints is “feeding through” to higher prices on a wide range of goods
⦁ Supply backlogs will take time to work their way through (transitory inflation)
⦁ Core measures of inflation are little changed since September. Gasoline prices, are not a part of the core CPI inflation measurement and have declined a bit recently
⦁ BoC is watching inflation and the effect on labor costs to “ensure that the forces pushing up prices” remain transitory as we work through the end of the pandemic
⦁ Canada’s economy grew approximately 5.5% in the third quarter, in line with expectations gaining back GDP to about “1.5% below the last quarter of 2019 before the pandemic began”
⦁ Job gains recently have recovered the employment rate “essentially back” to its pre-pandemic level, while job vacancies remain elevated and wage growth has picked up
⦁ Omicron has “injected renewed uncertainty” tightening travel restrictions in many countries and causing a decline in oil prices
There should be another good start for the housing market in 2022 after Canada experienced six months of employment growth up to November, exceeding expectations.
For a complete read of the BoC announcement on December 8th click here.
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