The Bank of Canada contemplated not raising interest rates last month but with the economy outperforming expectations, it decided on a hike.
BMO managing director of Canadian rates and macro strategist Benjamin Reitzes said the biggest revelation from the summary was that the central bank was actually considering holding its key interest rate last month, suggesting it was taking a more tepid approach than markets had thought.Advertisement 3But the Bank of Canada’s rationale for raising rates was exactly right, he added, noting the economy has been running hotter-than-expected.
“All governing council members acknowledged they were approaching this decision with a similar view: that the bank’s monetary policy to date had been forceful and that the full impact would be felt in quarters to come,” the summary said.Article content The summary also revealed that the Bank of Canada is concerned inflation might be stickier than expected.
According to the summary, after some deliberation on what forward guidance the central bank should give, governing council members were in broad agreement to signal a pause to convey that the bar for raising rates further is now higher.The release of the five-page summary follows a recommendation from the International Monetary Fund to increase transparency about the rate decision process.
As the Bank of Canada monitors how the economy reacts to higher borrowing costs, the summary shows it is closely watching global and domestic economic developments.
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