Economic eyes will be on the Bank of Canada this morning as the central bank is scheduled to make an announcement about its trendsetting interest rate.
Some economists are expecting the central bank to raise its key policy rate from its rock-bottom level of 0.25 per cent, marking the first of multiple hikes over the course of 2022.
Economists’ expectations are tied to annual inflation rates that in December hit a 30-year high, and survey data from the Bank of Canada showing consumers believe price gains will stay higher for longer.
A rise in the bank’s key policy rate would affect costs for loans like variable-rate mortgages and other borrowing linked to the benchmark rate.
If the central bank decides not to raise rates, governor Tiff Macklem may signal a potential increase in rates in March to give the bank time to see the economic fallout from the latest surge in COVID-19 cases due to the Omicron variant.
RBC senior economist Nathan Janzen says beyond the near-term risks from Omicron, the central bank is running out of reasons to keep interest rates at emergency low levels, adding that rates will rise soon.
This report by The Canadian Press was first published Jan. 26, 2022.