Former Bank of Canada economist says communications likely played into rate hike decision - BNN Bloomberg

Canada’s central bank announced Wednesday that it was raising its key interest rate by a quarter of a percentage point to 4.75 per cent in its continued bid to bring down inflation, breaking from a pause on rates hikes it had held since January’s hike to 4.5 per cent.

The Bank of Canada’s reputation with Canadians may have also weighed on policymakers’ minds before deciding to hike, St-Arnaud said, and the June rate hike may have offered a way to “restore credibility” and signal its aggressiveness on inflation. “It’s probably a communication and reputational reason to do it, basically to signal to everyone and to also influence expectations that, ‘We will be aggressive. Inflation is going back to two per cent, so don't expect it to be sticky.’”The Bank of Canada cited data showing a recent rise in inflation, stronger-than-expected economic growth, rebounds in consumer spending and housing and resilience in the labour market in a Wednesday statement explaining its policy decision.

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