FILE PHOTO: A sign is pictured outside the Bank of Canada building in Ottawa, Ontario, Canada, May 23, 2017. REUTERS/Chris Wattie
March 25, 2022
By Julie Gordon and David Ljunggren
OTTAWA (Reuters) -The Bank of Canada’s primary focus is to return hot inflation to target and it is prepared to act “forcefully” with rate hikes to do so, particularly as price pressures broaden, a deputy governor said on Friday.
Sharon Kozicki, in her first speech since joining governing council last year, also said the pace and magnitude of interest rate increases, along with the start of quantitative tightening, would be actively discussed at the central bank’s April meeting.
“Inflation in Canada is too high, labor markets are tight and there is considerable momentum in demand,” Kozicki said, speaking via webcast to the Federal Reserve Bank of San Francisco.
“It’s important to be clear that returning inflation to the 2% target is our primary focus and unwavering commitment. We have taken action and will continue to do so to return inflation to target, and we are prepared to act forcefully,” she said.
Kozicki’s words echoed statements by Governor Tiff Macklem earlier this month, who said the bank could act aggressively to tackle spiking prices.
Canada’s inflation rate hit 5.7% in Canada in February and is expected to go higher. The Bank of Canada hiked its policy rate to 0.5% earlier this month, up from 0.25% and its first increase in three years.
Money markets are betting the central bank will raise rates by a further 200 basis points this year. [BOCWATCH]
Kozicki said that while Canadian households appear to be in better financial shape now than at the start of the BoC’s last tightening campaign in 2017/18, indebtedness is above pre-pandemic levels and remains a key domestic risk.
“High indebtedness could amplify the impact of rising interest rates, and it could also worsen the impact of a future shock,” she said.
“We will watch developments with respect to households closely as we proceed,” she added.
The Canadian dollar was trading 0.4% higher at 1.2482 to the greenback, or 80.12 U.S. cents, its strongest level since Jan. 20.
(Reporting by Julie Gordon in Ottawa; addiitional reporting by Fergal Smith in Toronto; editing by Diane Craft)
Source: One America News Network
