MNI: BOC Wanted Fast Growth, Some Saw Downside Risks-Minutes

Bank of Canada officials agreed the economy needs above-potential growth to ensure inflation doesn't undershoot their target while there was division around whether price risks were tilting to the downside, minutes from the Sept 4 decision to lower interest rates for a third meeting showed.

The Summary of Deliberations published Wednesday lacked specific detail on whether a scenario of cutting interest rates by 50 basis points was discussed, a prospect Governor Tiff Macklem hinted at during his press conference following the rate cut. A growing number of economists and investors say a half-point move is needed with inflation back at 2% and unemployment rising.

"Some members took the view that the risks were balanced," the minutes showed. "Some had become more concerned with the downside risks to inflation, particularly if the economy and labour market weakened further." (See: MNI INTERVIEW: Big CPI Undershoot Unlikely- Ex-BOC Schembri)

Governing Council members discussed a scenario where they could "slow the pace of further cuts" and another where "it may be appropriate to lower the policy interest rate more quickly." The minutes showed no direct discussion of the influence of Fed policy on the BOC, with officials noting a decline in bond yields as investors saw U.S. borrowing costs coming down soon.

Since the last rate decision, Canadian inflation has slowed from 2.5% to 2.0% and the unemployment rate rose to the highest since May 2017 excluding the pandemic.