The Bank of Canada’s future interest rate decisions will be “more data-dependent,” says the Bank of Canada’s Deputy Governor Sharon Kozicki, following a key interest rate hike of another half percentage point on Thursday.
“We’re starting to see signs that our past tightenings have taken action and we’ve already taken a lot of actions ourselves in raising the interest rate,”
said Kozicki at a press conference in Montreal on Dec. 8.
“In that world, the data dependence is signalling that we’re very interested in seeing again how the economy responds and continues to respond to the actions we have taken.”
On Dec. 7, the bank
raised interest rates by another 50 basis points, or half a percentage point. The interest rate now sits at 4.25 percent.
Prior to the press conference Thursday, Kozicki
said in a speech before the Institut de développement urbain du Québec that the central bank now expects its future interest rate decisions to “be more data-dependent,” but added that the bank will be “forceful” with rate hikes if necessary.
“We are moving from how much to raise interest rates to whether to raise interest rates,” she said.
Clarifying her comments later during the press conference, Kozicki said the rate decisions are “always data-dependent.”
“But the direction was already obvious,” she said, referring to how the bank has raised the rate by 4 percentage points since March. “That’s why we’ve changed the way that we’re using the language.”
Possible End of Hikes
After announcing this week’s rate increase, the Bank of Canada hinted that the hikes may soon be over.“Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target,”
the bank said in a statement on Dec. 7, which is a
slight shift from October when it said it “expects that the policy interest rate will need to rise further.”
Gov. Tiff Macklem has previously told Senate committees that he believes a severe recession in Canada this winter or beyond to be unlikely.
On Nov. 1, he told the
Senate banking committee that he expects Canada’s economic growth into the first several quarters of 2023 to be “roughly zero.”
“We’re just about as likely to have a couple of quarters of negative growth as we are to have a couple of quarters of positive growth,” Macklem said.
“It’s not a severe recession. It’s not a major contraction, but you could certainly get a couple of quarters of negative growth.”
Reuters and Rahul Vaidyanath contributed to this report.
