Canada’s Central Bank Urged To Be Cautious With Rate Guidance Amid Inflation And Weak Growth

RSM Chief Economist Joe Brusuelas said the Bank of Canada should adjust its forward guidance on interest rates cautiously as inflation risks rise while economic growth remains weak. According to Jin10, Brusuelas said the central bank sets its policy rate to achieve 2% inflation, but Canada’s CPI could move above 3% due to higher energy prices. He noted that GDP data showed the economy had contracted for two consecutive quarters, and that three of the past four quarters recorded declines. Brusuelas said the Bank of Canada would try to use its interest-rate decision on Wednesday and a subsequent press conference chaired by Governor Tiff Macklem to “find a balance point in an increasingly difficult policy outlook,” adding that the outlook could at some point require rate hikes despite economic weakness. He said that if the energy-price shock persists, the Bank of Canada might have to raise interest rates in the autumn of this year.