MNI BRIEF: BOC Calls Talk Of Normalizing Rates Lower Premature

Bank of Canada Deputy Governor Toni Gravelle said Wednesday hot inflation makes it premature to consider lowering interest rates to more regular levels, adding so far there's little evidence of major domestic distress from the collapse of Silicon Valley Bank and Credit Suisse.

“Hopefully over time if inflation does follow the path we projected in the January MPR there will be a time in the later part of the projection that we might need to normalize rates in the other direction, from high levels towards lower levels," he said, referring to the Bank's quarterly economic forecast paper.

"But at this stage it’s way too early to talk about the normalization coming down part” with Canada “not being anywhere near” the 2% inflation target, he said. Consumer prices rose 5.2% in February and the Bank says inflation could slow to 3% by mid-year. The Bank's policy lending rate was left at the highest since 2007 this month at 4.5%.

“We said it (the pause in rate hikes) was conditional because our concern is that at these high levels we have more concern for any positive shock that increases aggregate demand or growth.” (See: MNI INTERVIEW: Canada Budget Keeps BOC On Pause: Ex Official)