Bank of Canada won’t follow U.S. Fed on rates despite inflation risks: official
Global News
A senior official at the Bank of Canada says the central bank will tailor its interest rate decisions to the domestic context, not what happens beyond Canadian borders.
The Bank of Canada will make its own interest rate decisions and not be influenced by policymakers beyond Canadian borders, a senior official said Thursday, a day after the central bank held its policy rate steady for the first time in over a year.
Senior Deputy Governor Carolyn Rogers affirmed the Bank of Canada’s independence to chart its own path on interest rates during a speech to a business crowd in Winnipeg.
Her comments come as the U.S. Federal Reserve has signalled its own policy rate might need to rise higher than first expected. Economists have flagged the vulnerability of the Canadian dollar if the Bank of Canada lags its U.S. counterpart as a possible risk to the outlook for inflation and the wider economy.
But Rogers said that the Bank of Canada’s policymakers would decide its rate path based on the Canadian context, not what central banks beyond its borders are doing.
“Major economies around the world are highly interconnected — but while we’re always thinking globally, we have to act locally. We must tailor our policy to Canadian circumstances,” she said, according to her prepared remarks.
“Canada, like other countries, has unique circumstances that will affect the path of the economy and inflation. But that’s the advantage of an independent monetary policy: We can get back to our inflation target of two per cent in a way that makes sense for us, just as other central banks are doing for them.”
Rogers was asked after her speech about the pressure to keep pace with the Fed and acknowledged that what happens in the U.S. economy will inevitably have knock-on effects in Canada that the central bank might have to contend with.
She said that while the Bank of Canada does not target exchange rates for the Canadian dollar with any other currency in its policy decisions, anything that lowers the forecast for the loonie might impact the central bank’s outlook for inflation.
