By Julie Gordon and David Ljunggren
OTTAWA (Reuters) – The Bank of Canada on Wednesday held its key overnight interest rate at 0.25%, as expected, and maintained its guidance that a first hike could come as soon as April 2022.
The central bank, in a regular rate decision statement, also said “devastating floods” in British Columbia last month, which cut off access to the country’s largest port, and the Omicron coronavirus variant could hinder economic activity.
“(This) could weigh on growth by compounding supply chain disruptions and reducing demand for some services,” it said.
Still, it noted that recent data suggested Canada’s economy had “considerable momentum” into the fourth quarter, with job vacancies high and wage growth picking up.
The central bank said it continued to expect inflation to remain elevated in the first half of 2022, easing back to the target rate in the second half of the year.
Headline inflation has been above the central bank’s 1%-to-3% control range for seven months, as global supply chain bottlenecks and high energy prices fueled price acceleration.
“The effects of these constraints on prices will likely take some time to work their way through, given existing supply backlogs,” the central bank said.
It reiterated that it would keep rates at record low levels until economic slack is absorbed and its 2% target is sustainably achieved, which it sees happening in the middle quarters of 2022.
The Canadian dollar was trading nearly unchanged at 1.2641 to the greenback, or 79.11 U.S. cents, giving back its earlier gains.
(Reporting by Julie Gordon in Ottawa; editing by Jonathan Oatis)
