Senior Deputy Governor Carolyn Rogers, in her first speech since joining the board in December, said interest rates are expected to rise. His remarks made no reference to the bank’s need to act “forcefully”, a phrase central bank officials have used in their recent appearances.
“With the Canadian economy starting to overheat, we can’t let demand get too far ahead of supply or we risk making inflation even worse,” she told a women’s group. Toronto business.
Ms Rogers acknowledged that interest rates remain low, despite the Bank of Canada’s rare 50 basis point (bp) hike last month to 1%, but reiterated that they needed to be higher .
“The increase in the policy rate will help moderate spending and contain inflation,” she said, adding that the central bank is “committed to bringing inflation back to target.”
Rogers pointed to bottlenecks in global supply chains and high commodity prices as the main factors pushing Canada’s inflation rate “near 7%”, well above the rate of 1-3% control and the Bank of Canada’s 2% target.
Canadians are also spending more, business investment and exports are picking up, and unemployment is at an all-time high, forcing employers to compete for workers, which will likely lead to wage inflation, she said. addition.
The Canadian dollar was trading up 0.2% at 1.2850 to the greenback, or 77.82 US cents, as the greenback plunged against a basket of major currencies.
Currency markets have fully priced in another 50 basis point move at the Bank of Canada’s next policy decision on June 1, with a 15% chance of a bigger move.
Last week, Governor Tiff Macklem said the Canadian economy was overheating, creating domestic inflationary pressures, and reiterated that higher rates were needed.
Inflation in Canada reached its highest level in 31 years in March, 6.7%, in the context of generally rising prices. This is the 12th month in a row that inflation has exceeded the central bank’s 1-3% control band.