By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929
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In a surprising yet not wholly unexpected turn of events, the Omicron Covid-19 variant has negatively impacted the economy.
Given the expectations that the Central Bank would begin to raise interest rates now that the economy was recovering from the pandemic, it may be somewhat of a shock (or not) that the Bank of Canada is doubtful about raising interest rates in the face of Omicron.
Economists and mortgage experts from across the country admit that the overnight lending rate must increase to stop inflation from soaring to unprecedented levels. But if the economy is tottering on volatility like another wave of lockdowns and further disruptions both internationally and here at home, the BoC may have no choice but to leave rates low for some time. Of course, this will only add more speed to the increase in real estate value, currently plaguing cities like Vancouver, Toronto & Calgary.
On December 8, at the last meeting, the Bank of Canada decided to leave its overnight rate at .25% even though it had signalled this rate would increase because of mass vaccinations and job recovery.
Although the global economy is showing signs of positive growth like in the United States, where there has been much economic expansion, other countries still face shortages and disruptions to various supply chains.
Omicron has also raised concerns, and, as a result, has initiated various travel bans by countries around the world. Oil prices have also declined, which has regenerated insecurity about how the global economy is recovering.
The Bank of Canada states it remains "committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved."