Bank of Canada Maintains Interest Rate At 0.25 Percent
OTTAWA–The Bank of Canada is keeping its key interest rate at 0.25 percent.
Many economists had predicted the rate would rise based on inflation hitting a 30-year high in December.
However, the central bank expects interest rates will need to increase, with the timing and pace of those increases guided by the Bank’s commitment to achieving the 2 percent inflation target.
The current inflation rate in Canada is near 4.8 percent. Many have predicted that the price of essential items will continue to rise throughout the country in 2022.
A rise in the interest rate would affect costs for loans like variable-rate mortgages and other borrowing linked to the benchmark rate.
The next update is scheduled to happen March 2.
A recent study from the Fraser Institute suggests Canada is experiencing a high level of economic woes due to factors like inflation and unemployment.
The study, titled “Return of The Misery Index,” says Canada had the sixth-worst misery score (10.88) out of 35 industrialized nations in 2021. The score is a combination of the country’s inflation rate and unemployment rate.
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Canada’s inflation rate in 2021 was 3.15, while the unemployment rate was 7.72. This score is very high when you look at the two best scores in the study: Switzerland (3.57) and Japan (2.61).
Canada had the fourth highest inflation rate and eighth highest unemployment among the 35 countries surveyed.
Jason Clements, executive vice president of the Fraser Institute, says the federal government can curb high inflation by working with the Bank of Canada and watching its spending.
“The federal government could signal its commitment to working with the Bank of Canada to ensure we return to a normal and stable level of inflation,” says Clements. “Instead, it’s quite clear there was contentious negotiations between the bank and the government over the renewal of the bank’s mandate.”
“Moreover, the federal government could curtail spending to present a clear path back to a balanced budget, and in particular be more judicious about subsidizing workers not to work. Remember, at its core, the inflation problem is about too many dollars chasing too few goods and services.”
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