Bank of Canada ‘still prepared to be forceful’ on interest rates if needed: official

A day after the Bank of Canada signalled it would be open to a pause on interest rate hikes in 2023, an official with the central bank said it was “still prepared to be forceful” with its policy rate should the economy fail to slow as needed to beat inflation.

The Bank of Canada raised its benchmark interest rate by half a percentage point on Wednesday, bringing the policy rate up to 4.25 per cent.

The central bank also delivered a shift in tone alongside the rate hike, saying in a statement that it would “consider whether the policy rate needs to rise further” rather than the more direct language used in previous announcements earlier this year, when the bank had said outright that rates would need to go higher to effectively tamp down inflation.

Bank of Canada Deputy Governor Sharon Kozicki gave more insight into the central bank’s path forward in a speech to the Institut de Développement Urbain du Québec on Thursday afternoon.

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Kozikci re-emphasized that the Bank is open to a pause with its next rate hike in January, but she said the decision on how high rates will have to go in 2023 will be informed by upcoming data on inflation, the slowing of the Canadian economy, and relief in global supply concerns.

“If we are surprised on the upside, we are still prepared to be forceful,” she said while speaking in French, according to prepared remarks of her speech.

More to come.