Policymakers led by Governor Tiff Macklem increased the benchmark overnight rate to 4.75 per cent, ending a pause they declared in January after Canada’s economy proved surprisingly strong despite much higher borrowing costs.
“Usually what happens in Canada, nobody in the U.S. cares,” Fidelity Investments portfolio manager David Wolf, a former adviser to the Bank of Canada, said on BNN Bloomberg Television. “But in this case, I think people are taking the message that maybe all of these central banks aren’t as close to done as people would have thought.”
The Bank of Canada’s decision didn’t include much forward-looking language, suggesting officials have jumped back into hiking mode without any certainty about where borrowing costs will ultimately end up. It’s a vindication for economists such as Citigroup Inc.’s Veronica Clark, the first analyst in a Bloomberg survey to predict a rate hike this week. “The Bank of Canada did pause. They waited to see how the data were coming in. They were expecting activity and inflation to slow and it didn’t,” she said Wednesday by phone.
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