The Bank of Canada did not want to give the impression that it was finished raising interest rates – or that the cost of borrowing would soon fall – in communicating its latest policy rate decision, according to documents released Wednesday.
Bank of Canada board fears decision to keep its benchmark interest rate unchanged on Sept. 6 could be ‘misinterpreted’ as a sign the central bank’s rate-tightening cycle was over , or that rates could even fall in the short term. , according to a copy of the deliberations of the meeting of policy makers.
The Bank’s decision-makers chose to emphasize that the evolution of future rates was data dependent and to “underline their willingness to further increase interest rates if necessary.”
The deliberations show continued concerns about “a lack of progress on underlying inflation”, even as other aspects of the economy show signs of slowing amid higher interest rates.
The decision to leave the Bank of Canada’s benchmark rate unchanged earlier this month was widely expected by economists, who viewed the slowing economy and rising national unemployment rate as a sign that inflation would continue. to calm down despite some persistent pressure on prices.
But Wednesday’s deliberations show the Bank of Canada remains concerned about the pace of wage increases in the labor market, which have hovered around four and five percent per year in recent months.
“Members still view annual wage increases within the current range as inconsistent with achieving price stability without a strong increase in productivity,” the deliberations state.
Tuesday’s Consumer Price Index report from Statistics Canada saw the headline inflation figure rise to 4 per cent in August from 3.3 per cent the previous month – a rise fueled by the rise gas and housing costs.
Core inflation indicators favored by the Bank of Canada also accelerated during the month. Deputy Governor Sharon Kozicki said in a speech after the release of CPI data on Tuesday that still high core inflation was not consistent with a return of inflation to the 2% target of the central bank.
In fashion now
Economists reacting to August inflation figures said the Bank of Canada is in a tough spot ahead of its next rate decision on October 25.
BMO Chief Economist Doug Porter told PKBNEWS on Tuesday that the chances of an October rate hike increased after the inflation data, but he still expected the central bank is holding on and waiting for further signs of easing in the economy before increasing the cost of inflation. borrow again.
“We still think the Bank of Canada is going to bite the bullet and not raise rates again,” he said.
This year, the central bank began publishing its deliberations on interest rate movements two weeks after the fact, in a bid to be more transparent about monetary policy decisions.
— with files from Nivrita Ganguly of PKBNEWS
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