The Central Bank of Canada kept the benchmark rate steady at a record low of 0.25% on Wednesday, saying a recovery during the pandemic “continues to require extraordinary monetary policy support.”
At the same time, it significantly increased its growth estimates, forecasting a 6.5 percent increase this year, up from an earlier prediction of four percent.
The bank said in a statement that it intends to hold the policy interest rate until the economy is recovered, possibly in the second half of 2022, moved up from an earlier prediction of 2023.
The improved outlook means the likelihood that borrowing costs will rise late next year has increased.
“The most important factor in the unexpected economic strength has been the resilience and adaptability of Canadian households and businesses,” bank governor Tiff Macklem said in a conference call with the media.
Bank governor Macklem said the second wave had much less economic impact than the first wave, with a quick bounce back and substantial job gains in February and March.
Based on employment figures for March, the central bank estimated that about 300,000 more people would need to be hired to get back to pre-pandemic levels, or 475,000 when factoring in population growth.
The central bank sees economic growth in the United States, which is Canada’s largest trading partner, at seven percent this year, up from a previous prediction of five percent.
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