OTTAWA— The Bank of Canada has come under political pressure to stop hiking rates as the economy cools. The central bank held its key policy rate at 5 percent on Sept. 6 but said it’s “prepared to increase the policy rate further if needed,” as it remains concerned about inflation persisting.
Bay Street economists say the current overnight rate target of 5 percent will likely be as high as the BoC goes. Professor emeritus of economics Steve Ambler at Université du Québec à Montréal says the BoC has to maintain its credibility that it’s tough on inflation while also watching how the economy evolves.
“I think it lost some of its credibility when it started raising rates too late, and I think they’re really worried that, unless they maintain their credibility, that inflation is going to take longer to beat,” he said in a Sept. 6 interview.
BMO chief economist Doug Porter noted the “hawkish” nature of the central bank’s statement.