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MNI: BOC Showed More Unity Hikes Are Over In Meeting Minutes

Bank of Canada headquarters

Bank of Canada officials showed more unity around the idea they are done raising interest rates in this cycle and removed language about a high-for-long stance, according to minutes published Wednesday from the Dec 6 decision to keep the highest borrowing costs since 2001.

"Members agreed that the likelihood that monetary policy was sufficiently restrictive to achieve the inflation target had increased," the minutes showed.

Previous meeting notes said some of Governing Council's six members felt it likely the benchmark rate would need to rise an 11th time while others saw "a 5% policy rate would be sufficient to get inflation back to the 2% target, provided it was maintained at that level for long enough."

Most investors say the Bank's next move is a cut, though views vary from as soon as March until sometime in the second half of next year. Governor Tiff Macklem said Friday there's more evidence the 2% inflation target is coming into view but that the debate on cuts will only happen when there's convincing evidence it can be reached sustainably. The Bank forecasts it will take until 2025 for CPI return to target.

Inflation stalled at 3.1% in a Statistics Canada report Tuesday, underlining that the return to price stability may be bumpy. "They also agreed that risks to the inflation outlook remained, and it may still be necessary to increase the policy rate to secure further disinflation," the minutes showed.

Officials combined their decision to continue warning about tighter policy with the view a slowing economy is restraining inflation. "Overall, Governing Council members concluded that recent data pointed in the right direction" even amid "elevated" risks, the Summary of Deliberations showed. "The expected decline in inflation could stall with inflation still materially above 2%, or new developments could lead to renewed inflationary pressures."

The Bank began publishing minutes this year following an IMF finding Canada's central bank was one of the least transparent among its peers. The minutes don't provide vote tallies in a system where only the governor is legally responsible for policy, and officials say they make decisions by consensus.

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

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