MNI BRIEF: BOC Hike To Mostly Dampen Price Expectations-Ragan

The BOC's imminent rate hike will have the most success keeping inflation expectations in check while having little effect on pent-up consumer demand for things like vacations or on easing supply-side bottlenecks, former central bank and finance department adviser Chris Ragan said.

There is a risk that inflation expectations become "unleashed" and rate hikes “can work very importantly to keep expectations anchored,” the McGill University professor said during a webinar hosted by the Global Risk Institute. Slimming its balance sheet also will help slow the growth of commercial bank lending, which could be fueled by a buildup of deposits linked to QE, Ragan said.

Ragan last year told MNI the BOC should stick to a narrow 2% inflation mandate, and in the Wednesday seminar said the actual mandate renewal added unclear language, noting the Governor and Finance Minister denied that it amounted to a Fed-style dual mandate.