The Bank of Canada left its interest rates unchanged, but said it plans to change policy by mid-2022. It could not do it this early because the economy is still improving under the current monetary system.
According to the latest reports, Canada's economy expanded in the fourth quarter, with widespread job gains bringing employment near pre-pandemic levels. The number of vacancies were high and wages also accelerated.
But the Bank of Canada highlighted potential risks to the economy, noting the uncertainty surrounding Omicron and the devastating flood in British Columbia, which could aggravate the problems in the supply chain.
Fortunately, price pressures may ease next year.
This is why the bank expects the first rate hike to take place by mid-2022, but CIBC chief economist Avery Shenfeld said it could happen as early as April.
According to him, the overall increase should be 150 basis points and will occur in 2022 and 2023. But the Bank of Canada said it will stick to the Fed's schedule.
Stephen Brown, senior economist at Capital Economics, also expects rates to hike by April.