The BoC kept rates on hold and did not update its rate hike signal. USD/CAD also halted the decline.
As expected, the Bank of Canada (BoC) decided not to change the interest rate at 0.25%. In a monetary policy announcement released on Wednesday (08/December) this evening, the Canadian central bank said it was still open to raising interest rates in April 2022; dashed the market's hopes of a faster rise.
The BoC touched on the problem of flooding in British Columbia and the anticipation of the Omicron impact in its monetary policy statement. Floods that occurred last November have cut off access to Canada's largest port. Meanwhile, the Omicron variant is feared to slow down economic activity.
"(Those issues) could weigh on growth by increasing supply chain disruptions and reducing demand for the services sector," the BoC said.
Nevertheless, Canadian economic data is considered to still show momentum in the fourth quarter. Job opportunities are wide open and wage growth is increasing.
Canadian inflation is predicted to continue to rise until the first half of 2002, and will only decline in the second half. Headline inflation in the next seven months is expected to be at the level of 1% - 3%. In general, April 2022 is believed to be the right time to raise interest rates. "The BoC is poised for a rumble (in inflation). The central bank is signaling a move (to raise interest rates) in April," said Avery Shenfeld, analyst at CIBC Capital Markets.
USD/CAD Slightly Up
After the BoC announcement, the Canadian Dollar stopped strengthening against the US Dollar. USD/CAD edged up 0.1% to 1.2649 at press time. In the previous two days, the CAD pressured the US Dollar down by almost 2% following a resurgence of risk appetite amid waning concerns over the Omicron variant.
"The Canadian dollar is a bit weak with the release (BoC announcement) as there is no upgrade of the central bank's projections in its monetary policy statement," commented Simon Harvey, analyst at Monex Europe, "Growth risks posed by the latest COVID variant and the recent British Columbia crisis. recently made policymakers less committed."
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