No change to Bank of Canada key interest rate

OTTAWA – The Bank of Canada is cutting its expectations for economic growth this year as it keeps its key interest rate target on hold at 0.25 per cent.

The central bank says it expects the economy to grow 6.0 per cent in 2021, down from its previous forecast of 6.5 per cent.

However, the bank now expects growth of 4.6 per cent in 2022, up from its earlier forecast of 3.7 per cent.

The bank says economic conditions have improved enough that it will reduce its weekly purchases of federal bonds to $2 billion from $3 billion.

The Bank of Canada also expects inflation to run above three per cent for the rest of the year because of higher gasoline prices and service businesses raising prices as demand returns.It doesn’t expect the economy to be ready to handle an increase in rates until the second half of 2022.