Bank of Canada shifts tone on rate announcement, signaling likely July hike
Canada’s central bank has cleared the way for a July interest rate hike, warning that it will need to act soon to keep inflation from pushing past its 2-percent target.The Bank of Canada kept its key interest rate target unchanged at 1.25 percent last week, citing the impact of trade uncertainty, a slowdown in housing activity and mounting “stress” in emerging markets.
Bank of Canada Governor Stephen Poloz generally does not broadcast future rate moves with explicit forward guidance. But on Wednesday, it’s was what Mr. Poloz and members of the bank’s governing council didn’t say that shifted expectations. The statement accompanying the rate decision dropped two key phrases that have been a staple of the bank’s communication for months. Gone is the reference to being “cautious” about future policy changes. Also absent is the qualifier that higher rates will be needed “over time.”
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