The Globe and Mail reports in its Friday edition that Bank of Canada deputy governor Lynn Patterson says rolling back the bias toward hiking rates again will depend on incoming economic data as the bank prepares for its next rate decision on April 24. The Globe's Barrie McKenna writes that Ms. Patterson says, "At this point, we are looking to see whether some of that [economic] weakness is temporary or it's more persistent, and we're going to need more data before we can assess that."
Among the key surprises for the BOC is how consumers are reacting to such factors as higher borrowing costs, the "wealth effect" of the cooling housing market and the slowing growth of disposable income. All of that, she says, is causing Canadians "to be more cautious about their spending." She says consumers are cutting back on all sorts of discretionary spending, including new cars, restaurant meals, renovations and foreign vacations.
She says, "It is in these categories that we are seeing shifts in spending habits."
Ms. Patterson says the bank may need to revise its estimate of the neutral interest rate -- the level where interest rates neither perk up, nor slow down, the economy -- at its next rate decision in April.
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