By: Thomas I. Likness
EBC News Service
(Eagle News) — The Bank of Canada kept its benchmark interest rate at 0.25% Wednesday saying there is still a need to support economic recovery.
Although the economy made substantial gains in the first quarter of this year, the BoC says it is concerned about the third wave of the pandemic sweeping across Canada.
“New lockdowns will pose another setback and the labour market remains difficult for many Canadians, especially low-wage workers, young people and women,” the BoC said in a statement.
It remains optimistic for the remainder of the year.
“As vaccines roll out and the economy reopens, consumption is expected to rebound strongly in the second half of this year and remain robust over the projection,” the BoC said.
A red hot housing market has bankers concerned as buyers competing for a limited supply of houses take advantage of lower interest rates.
“Housing construction and resales are at historic highs, driven by the desire for more living space, low mortgage rates, and limited supply,” said the BoC. “The Bank will continue to monitor the potential risks associated with the rapid rise in house prices.”
For the time being, rates are expected remain low.
“Even as economic prospects improve, the Governing Council judges that there is still considerable excess capacity, and the recovery continues to require extraordinary monetary policy support,” said the BoC.
The central bank says it will hold off on raising rate until the 2% inflation target is sustainably achieved.
(Eagle News Service)