The Globe and Mail reports in its Thursday edition that the Bank of Canada remains adamant that interest rates still are not high enough. The Globe's David Parkinson writes that the way the BOC said so, however, in announcing its latest rate increase suggests that a change is afoot. In raising its key policy rate on Wednesday to a 14-year high of 3.25 per cent, the BOC laid the groundwork to slow or even pause rate increases later this year. Mr. Parkinson says we are not at the peak of rates, but we may be seeing our first hazy glimpse of it.
The 0.75-percentage-point rate hike itself was precisely what was anticipated, and the statement accompanying the decision did not say much that was not already known. The BOC said demand in the Canadian economy is still excessive relative to supply, concluding that "the policy interest rate will need to rise further." Given that the BOC still asserts that rates must rise further, Mr. Parkinson says we will likely have one more increase (probably a smaller one) in October. Assuming the bank is happy with how the economy and inflation evolves between now and then, the path would then be clear for the bank to take a break and let its policy moves play out for a while.
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