Rosenberg on rate hike: 'I would have done absolutely nothing'
11 July, 2018, 23:44 | Author: Regina Silva
"There have only been two monetary authorities in the developed world this year that has raised interest rates - there has been the [U.S.] Fed and the Bank of Canada and frankly, I don't know what makes the Bank of Canada so special", he said.
Governor Stephen Poloz said trade tensions were the biggest issue on the table.
As in April, the projection incorporates an estimate of the impact of trade uncertainty on Canadian investment and exports.
As with other monetary policy officials, the BoC shed some light on the impact of trade disputes and tariffs on the economy.
The bank said USA steel and aluminum tariffs imposed in June and retaliatory countermeasures by Canada in July would trim exports, imports and economic growth, and boost inflation, but strong global demand and higher commodity prices were offsetting the tariff headwind.
The Bank of Canada also has its eye on how widening global trade disputes, including an intensifying battle between the USA and China, will affect the world's economy.
Raising interest rates will nearly certainly slow consumer spending, and there is no guarantee that Canadian business investment will increase to offset that - especially in the face of increased global trade tensions, Rosenberg said.
Governing Council expects that higher interest rates will be warranted to keep inflation near target and will continue to take a gradual approach, guided by incoming data.
The Bank of Canada chose to raise its overnight rate target to 1.5% on Wednesday as the economy continues to operate close to its capacity and the CPI remains near the 2% target.
The country's inflation rate is expected to rise as high as 2.5% - above the 2% mid-point of the bank's target range - due to temporary factors such as higher gasoline prices.
The bank, however, noted in its report that despite "healthy" labour market conditions, employment growth and average hours worked have slowed down compared to last year's surge. CPI inflation is expected to edge up further to about 2.5 per cent before settling back to 2 per cent by the second half of 2019. The bank had been criticized for a surprise rate hike last September.
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