Bank of Canada holds rate steady, says COVID-19 economic recovery likely by 2022

Photo: The Canadian Press

The Bank of Canada is keeping its key interest rate on hold as it says the country's economy won't fully recover what was lost to COVID-19 until 2022, with the road to there dependent on the path of the pandemic.

The central bank is holding its overnight rate target at 0.25 per cent.

In July, the Bank of Canada said it believed the country had been spared from a worst-case scenario.

The bank's updated outlook today continues that thought, saying the rebound over the summer was stronger than expected with the country reversing about two-thirds of the decline in the first half of the year.

The monetary policy report estimates the economy will shrink by 5.7 per cent this year, but grow by 4.2 per cent next year, and 3.7 per cent in 2022.

The report also forecasts that the country's inflation barometer, Statistics Canada's consumer price index, will stay below the bank's two per cent target through 2022.