The Bank of Canada released the summary of its deliberations of the October 25 meeting. At that meeting, the central bank kept interest rates unchanged. The document showed that “some members felt that it was more likely than not that the policy rate would need to increase further to return inflation to target.” While others viewed the most likely scenario as the current rate would be sufficient, “provided it was maintained at that level for long enough.”
Key takeaways:
Some members felt that it was more likely than not that the policy rate would need to increase further to return inflation to target. Others viewed the most likely scenario as one where a 5% policy rate would be sufficient to get inflation back to the 2% target, provided it was maintained at that level for long enough.
There was a strong consensus that, with clearer evidence of higher interest rates moderating spending, slowing growth and relieving price pressures, Governing Council should be patient and hold the policy rate at 5%. They agreed to revisit the need for a higher policy rate at future decisions with the benefit of more information.
Given the slower-than-expected progress toward price stability and increased inflationary risks, members agreed to state clearly that they were prepared to raise the policy rate further if needed.
Members noted that they needed to see downward momentum in core inflation to be confident that monetary policy was sufficiently restrictive to restore price stability.
Market reaction
The USD/CAD is up for the third consecutive day, trading around 1.3800, boosted by a stronger US Dollar. The summary of deliberations had no significant impact on the Loonie.
Read the full article here