Bank of Canada ‘still prepared to be forceful’ on interest rates if needed: official – National | Globalnews.ca

a day later bank of canada indicated it would be open to a break Rate of interest A hike in 2023, with a central bank official saying it was “still poised to capitulate” with its policy rate should the economy fail to slow enough to beat inflation.

Bank of Canada hiked its benchmark interest rate half a percentage point on WednesdayBringing down the policy rate to 4.25 per cent.

The central bank also changed tone with the rate hike, saying in a statement that it would “consider whether to raise the policy rate further” instead of the more direct language used in previous announcements earlier this year. is needed” clearly stated that rates would need to go higher to effectively bring down inflation.

Sharon Kozicki, deputy governor of the Bank of Canada, gave more details on the central bank’s path forward in a speech at the Institut de Développement Urbane du Québec on Thursday afternoon.

Kozicki reiterated that the bank is open to a pause with its next rate hike in January, but said a decision on how higher rates will go in 2023 will depend on upcoming data on inflation, the slowing of the Canadian economy. Will be informed from , and relief in global supply concerns.

Speaking to reporters after his speech, Kocicki was asked whether a sizeable move larger than the usual 25 basis points was still on the table and he did not rule out the possibility.

“If there is a significant setback, we will be ready to take coercive action to rein things in,” she said.

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Kocicki said the inflation and interest rate environment at the end of the year is very different from when the central bank began its rate hike cycle in March.

At the time, interest rates were at a historic low of 0.25 percent and inflation was climbing. Kozicki said “it was very clear which direction it needed to go” at that point it was just a question of how much they needed to grow.

With headline inflation peaking over the summer and parts of the economy showing signs of easing, he said the Bank of Canada faces a new environment that opens the door to the question of whether further rate hikes are needed. Is.

Kocicki said in his speech that inflation, which stood at 6.9 percent in October, more than three times the bank’s two percent target “remains very high”.

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But the three-month rate of core inflation has declined to about 3.5 percent, Kozicki said, a sign that “inflation is losing momentum.”

While economic growth remained strong in the third quarter, a softening of demand in interest rate-sensitive sectors such as housing activity is a sign that tighter monetary policy is “working to balance supply and demand,” she said.

The Bank of Canada’s next interest rate decision will come on January 25.

With Reuters files

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