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MNI: BOC Discussed Rate Hike, Lacked Enough Evidence: Minutes

Bank of Canada headquarters

Bank of Canada officials discussed raising interest rates before the April 12 decision to pause and concluded there wasn't enough evidence to justify further tightening, while arguing a rate cut that some investors predict for later this year is not the most likely policy outcome.

"Discussion around increasing the interest rate further focused on whether monetary policy was restrictive enough and whether it was best to raise the policy rate now or wait for more evidence," according to meeting minutes published Wednesday.

Possible justifications for a ninth rate increase included the resilient economy, persistent core inflation, the need to be forward looking on price pressures, and potential difficulty bringing CPI all the way back to the 2% target, according to the deliberations. Instead the rate was held at 4.5% for a second meeting because the economic outlook was little changed and there remained signs inflation pressures were easing.

(See: MNI INTERVIEW: BOC Has Done Enough To Slow Inflation-CD Howe)

Officials also discussed holding rates at the peak for longer and said their decision should keep in place "forward-looking communication" from earlier. "Governing Council agreed that it was important to continue to signal that it was prepared to increase the policy rate further if needed."

Governor Tiff Macklem and his deputies also discussed investor bets on a potential rate cut later this year, which Macklem had dismissed in earlier public statements. "Governing Council members agreed that while a risk of a sharper slowdown remains, based on their current outlook, cutting rates later this year did not seem to be the most likely scenario," the minutes showed.


The balance of supply and demand is clouded by record immigration, a topic of considerable discussion at the deliberations. (See: MNI INTERVIEW: Canada Job Data Keep Defying Gloom-Govt Analyst)

"While this was helping to alleviate labour pressures, it added to demand as well as supply," the minutes said. "With faster population growth, employment growth could be stronger than the historical trend without adding to labour market tightness."

Officials also discussed banking market tensions such as the collapse of SVB, largely reiterating comments that Canada has seen little collateral damage.

The minutes are the third edition of a program that started in January following an IMF recommendation. The Bank doesn't publish vote tallies in a system where only the Governor is legally responsible for policy. The Governor and his deputies often say they come to a decision by consensus.

MNI Ottawa Bureau | +1 613-314-9647 |
MNI Ottawa Bureau | +1 613-314-9647 |

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