(Bloomberg) -- The Bank of Canada kept the door open to raising interest rates again in this cycle, but policymakers agreed in early July that further adjustments would be taken on a case-by-case basis, according to a summary of their latest deliberations.
Governor Tiff Macklem and five other members of governing council debated pausing rate hikes before ultimately deciding to raise the benchmark overnight rate to 5% on July 12, the highest level in 22 years.
Wary of overtightening monetary policy, officials plan to wait for more information before making future rate decisions. The central bank's next scheduled decision is Sept. 6.
“Given the uncertainties around the forecast and the size and timing of the impact of higher interest rates on demand, they would approach future decisions one at a time based on the available evidence,” the bank said in the summary released Wednesday in Ottawa.
The deliberations confirm the Bank of Canada remains comfortable fine-tuning borrowing costs after going through one of the most aggressive hiking cycles in its history.
Much of the summary was reiteration. On the day of the July decision, Macklem revealed that he and his colleagues debated whether it was worth holding off to see more evidence before hiking again. They opted to raise borrowing costs after concluding the cost of delay outweighed the benefit of waiting.
Their deliberations also focused on determining why Canada's economy was stronger than expected earlier this year.
The governing council discussed income growth, household savings and population growth as possible reasons for strong consumer spending. They also talked about pent-up demand following the Covid-19 pandemic — especially for services — but said this “should wane over time.”
Notably, policymakers discussed growth in interest-sensitive sectors and a rebound in housing prices.
Officials spent time discussing the global economy, saying it was also proving stronger than expected. Robust consumer demand, tight labor markets and inflation expectations were leading core inflation measures to stay elevated in advanced countries, bank officials observed. While supply bottlenecks had eased, slowing goods price inflation, services demand increased.
Moving forward, policymakers reiterated that they will watch excess demand, inflation expectations, wage growth and corporate pricing behavior as they assess the dynamics of inflation.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
