MNI BRIEF: BOC Cites Policy "Traction" For Leading Fed On Cuts

MNI (LONDON) - Governor Tiff Macklem told reporters Tuesday the Bank of Canada has been able to lower interest rates before the Federal Reserve because its hikes gained "traction" with more consumers refinancing at higher mortgage rates.

Canadian mortgages often reset every five years versus popular 30-year loans in the U.S., Macklem said in response to a question from MNI, and over half of domestic borrowers have refinanced at higher rates. The BOC hiked from 0.25% to 5% before three quarter-point reductions since June.

“If things continue to evolve as we expect, it’s reasonable to expect further cuts in our policy interest rate,” he said. “If inflation proves to be stickier, it may be appropriate to slow the pace,” Macklem told reporters after a speech. “If the economy is materially weaker than we are expecting, inflation is weaker than we are expecting, it could be appropriate to take a bigger step.” (See MNI INTERVIEW: Big CPI Undershoot Unlikely- Ex-BOC Schembri)