OTTAWA - The Bank of Canada is keeping its key interest rate target on hold at its rock-bottom level of 0.25 per cent.
In a statement, the central bank also said Wednesday it doesn't expect to raise the trendsetting rate until some time between April and September next year, which is unchanged from its previous guidance.
The Bank of Canada also warned that high inflation rates will continue through the first half of next year.
The central bank said it won’t be until the second half of 2022 that inflation falls back toward its comfort zone of between one and three per cent.
By the end of next year, the bank is forecasting the annual inflation rate to fall to 2.1 per cent.
The bank said it is keeping a close eye on expectations for price and wage growth to make sure they don’t create a spiral of price increases.
"The bank is closely watching inflation expectations and labour costs to ensure that the forces pushing up prices do not become embedded in ongoing inflation," it said in announcing its interest rate decision.
The announcement marked the last scheduled rate announcement for 2021 from the central bank amid a flurry of strong, recent economic indicators.
Statistics Canada reported last week that the economy grew at an annualized rate of 5.4 per cent in the third quarter of the year, a hair below what the Bank of Canada forecasted in October.
The bank noted in its statement that the growth brought total economic activity to within about 1.5 per cent of where it was in the last quarter of 2019 before COVID-19 washed upon Canada’s shores.
Similarly, the labour market had a stronger-than-expected showing in November, pushing the share of core-age workers with a job to an all-time high and leaving the unemployment rate 0.3 percentage points above its pre-pandemic level in February 2020.
All of that suggests the economy had "considerable momentum into the fourth quarter," the bank said.
Still, the bank notes headwinds from devastating floods in British Columbia and uncertainties from the Omicron variant that "could weigh on growth by compounding supply chain disruptions and reducing demand for some services."
