Bank of Canada maintains its monetary policy unchanged in December as expected

The Bank of Canada announced on Wednesday that it has decided to leave its benchmark interest rate unchanged at 0.25%, as most economists, analysts, and traders expected. Short-term interest rate markets (STIRs) had priced at a modest 16% probability that the central bank would raise interest rates 25 basis points to 0.50%.

Key Findings from the Monetary Policy Statement Summarized by Reuters

“The BoC repeated that the slack will be absorbed sometime in the second or third quarter of 2022.”

“The variant Omicron Covid-19 and flooding in British Columbia could weigh on growth by exacerbating supply chain disruptions, reducing demand for some services. “

“The bank is still waiting for CPI inflation remains high in the first half of 2022 and relax to 2% in the second half. “

“The persistent supply bottlenecks they continued to inhibit growth in some areas of GDP in the third quarter, including non-commodity exports and business investment.

“Recent economic indicators suggest that the economy had considerable momentum in the fourth quarter; with employment “essentially back to pre-pandemic level” and wage growth has picked up“.

“CPI inflation is high and the impact of global supply constraints is being fed through a wider range of commodity prices. “

“Real estate activity had been moderating, but seems to be recovering, especially in resales.”

“The effects of these price constraints will likely take some time to make their way, given the existing supply backlogs.”

“In view of the current overcapacity, the economy continues to require considerable support from monetary policy“.”

“Accommodative financial conditions continue to support economic activity globally.”