Kevin Carmichael: No one expects Stephen Poloz to raise rates tomorrow, but we could see a shift all the same
In October, when the Bank of Canada last raised interest rates, Governor Stephen Poloz and his deputies said something new: “Governing Council agrees that the policy interest rate will need to rise to a neutral stance to achieve the inflation target.”
“If you drove your car with the same degree of precision that we are able to do monetary policy, you’d be in trouble all the time, driving on the two sides of the road and stuff, because it’s a very imprecise business,” Poloz told reporters in Washington recently. So imagine the frustration that those Bay Streeters and Wall Streeters felt when the Bank of Canada adjusted its outlook to reflect weaker-than-expected data. In December and January, policy makers added new variables to the list of factors that would determine the pace of interest-rate increases. And then in March they decided they favoured a policy setting that was “below the neutral range.”
Keep all of that in mind this week as you assess the latest from the Bank of Canada. On Wednesday, the central bank will update its policy stance and release a new quarterly report on the economy. That report will include the annual revision of the neutral rate, which could be a more important development than usual.
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