However, the BoC will likely keep the policy rate elevated to address core inflation
With headline inflation showing signs of slowdown per the latest data from Statistics Canada, the central bank now has more than enough reason to put an end to its current rate hike cycle, according to Pedro Antunes, chief economist at the Conference Board of Canada.
At the same time, Antunes believes that the Bank of Canada will keep the policy rate at its current 5% level for the foreseeable future since core inflation remains sticky.
“We don’t need to press the brakes any higher, and I think the bank will wait and see now going forward,” Antunes said in an interview with BNN Bloomberg.
Antunes pointed at mortgage interest costs, which rose by 30.1% annually in June, as a significant contributor to sticky inflation.
“That’s another piece as we see interest rates stabilizing we should hopefully see that moving down as well,” he said.
Canada’s annual inflation rate plunged to 2.8% in June as gas prices continued to fall, bringing yearly price growth within the Bank of Canada’s target range of 1% to 3%.https://t.co/lhPJyBa8zf#breakingnews #inflation #mortgageindustry #economy
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 18, 2023
BoC to stick to its inflation commitment
Antunes said that considering these trends, the central bank will almost certainly continue to try reassuring the public that it will be able to rein in the annual inflation rate down to its 2% target.
“I think they’re pushing hard on the message that they need to keep interest rates high to convince folks they will succeed in getting inflation down to that two per cent rate,” he said.
In a recent statement of policy deliberations, the BoC’s Governing Council said that it “recognized the importance of communicating clearly what it would be assessing as it approached future decisions. This allows both the bank and market participants to assess incoming data and their implications for economic growth and inflation.”
