Don’t take it for granted the Bank of Canada won’t at some point this year raise its overnight rate, even after putting increases on pause at its last two meetings..The bank’s governor, Tiff Macklem, speaking to the Toronto Region Board of Trade earlier this week, said any further turmoil in global banking and domestic financial conditions could throw a wrench into the central bank’s current policy rate strategy..“If financial stress were to lead to more tightening than expected and if this were to persist, we would need to take this into consideration as we set the policy rate to achieve our inflation target,” said Macklem, adding the BoC is not yet ruling out further hikes, despite global financial stability risks appearing “contained” at the moment..In April, after the bank’s most recent announcement of holding the rate at 4.5%, Josh Nye, senior economist at RBC, told Canadian Mortgage Professional (CMP) while financial market expectations of a rate cut by the end of the year had surged, Macklem dampened that speculation..Following the bank’s April announcement, Macklem told a press conference the bank was “prepared to raise the policy rate further” to return inflation to its 2% target if current monetary policy proved too loose..At the time, Nye said Macklem was trying to remind folks the bank has a tightening bias so in their view, the next move is probably more likely to be a "hike.”.At the Toronto Region Board of Trade meeting this past week, Macklem reaffirmed hikes are possible.“If we start to see signs inflation is likely to get stuck materially above our 2% target, we are prepared to raise rates further,” Macklem said..CMP reports the bank’s strategy is currently weighed towards inflation expectations and labour market growth and noted getting inflation back to the central bank’s 2% target will “take time.”.In terms of potential rate cuts, Macklem said it is still “too early to really be thinking about interest rate cuts.”.“Inflation fell from its peak of 8.1% last year to 4.3% in March,” he said. “We expect it will decline to around 3% this summer. This is good news and shows interest rate increases are working to rebalance the economy. But the work of monetary policy is not done.”.“Getting all the way there will take time and involves risks, notably that services price inflation could stay higher for longer than we expect.”
Don’t take it for granted the Bank of Canada won’t at some point this year raise its overnight rate, even after putting increases on pause at its last two meetings..The bank’s governor, Tiff Macklem, speaking to the Toronto Region Board of Trade earlier this week, said any further turmoil in global banking and domestic financial conditions could throw a wrench into the central bank’s current policy rate strategy..“If financial stress were to lead to more tightening than expected and if this were to persist, we would need to take this into consideration as we set the policy rate to achieve our inflation target,” said Macklem, adding the BoC is not yet ruling out further hikes, despite global financial stability risks appearing “contained” at the moment..In April, after the bank’s most recent announcement of holding the rate at 4.5%, Josh Nye, senior economist at RBC, told Canadian Mortgage Professional (CMP) while financial market expectations of a rate cut by the end of the year had surged, Macklem dampened that speculation..Following the bank’s April announcement, Macklem told a press conference the bank was “prepared to raise the policy rate further” to return inflation to its 2% target if current monetary policy proved too loose..At the time, Nye said Macklem was trying to remind folks the bank has a tightening bias so in their view, the next move is probably more likely to be a "hike.”.At the Toronto Region Board of Trade meeting this past week, Macklem reaffirmed hikes are possible.“If we start to see signs inflation is likely to get stuck materially above our 2% target, we are prepared to raise rates further,” Macklem said..CMP reports the bank’s strategy is currently weighed towards inflation expectations and labour market growth and noted getting inflation back to the central bank’s 2% target will “take time.”.In terms of potential rate cuts, Macklem said it is still “too early to really be thinking about interest rate cuts.”.“Inflation fell from its peak of 8.1% last year to 4.3% in March,” he said. “We expect it will decline to around 3% this summer. This is good news and shows interest rate increases are working to rebalance the economy. But the work of monetary policy is not done.”.“Getting all the way there will take time and involves risks, notably that services price inflation could stay higher for longer than we expect.”
