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Calls grow for Bank of Canada to ‘crush’ inflation with another rate hike – National

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The Bank of Canada is facing renewed calls for another interest rate hike after a surprise uptick in inflation last month.

The annual inflation rate in April rose slightly to 4.4 per cent, compared with 4.3 per cent in March, Statistics Canada reported Tuesday.

The central bank has kept its key rate on hold in two consecutive decisions after a rapid hiking cycle that saw the benchmark rate rise 4.25 percentage points over the course of a year.

Bank of Canada policymakers said the pause is conditional on inflation returning to three per cent by mid-year and left the door open to additional rate hikes “if needed.”


Click to play video: 'Bank of Canada keeps key interest rate on hold again: Tiff Macklem'


Bank of Canada keeps key interest rate on hold again: Tiff Macklem


Money markets continue to expect the central bank will hold steady at its next decision on June 7, but odds of a hike next month rose to roughly a one in three after the inflation surprise on Tuesday.

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Derek Holt, the head of Scotiabank Capital Economics, is among the voices on Bay Street expecting another interest rate increase — and sooner, rather than later.

Holt said in a note to clients on Wednesday that if the Bank of Canada does need to increase its benchmark rate, which sets the cost of borrowing for lenders and their customers, it’s better to do it early.

If business and consumer expectations for inflation remain elevated for longer, it’ll make it that much harder to get price pressures back under control and hit the Bank of Canada’s two per cent target, Holt argued.

“If the BoC doesn’t adopt the crush it, killer mentality, then it may never succeed in getting inflation down to (two per cent),” he wrote.

Holt also said the central bank is willing to surprise the markets with rate hikes, as market odds were wrong about the magnitude of rate increases in three of the eight decisions during the cycle.

Jay Zhao-Murray, an analyst at Monex Canada, said in a note earlier this week that in addition to the headline inflation figure rising in April, the central bank’s preferred measures tracking so-called “core inflation” accelerated on a three-month basis. These figures still cooled on an annual basis.

These concerns, in addition to signs the housing market correction has bottomed and sales activity is on the rise again this spring, could force the Bank of Canada to make an “insurance hike” in June, Zhao-Murray said.

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Other economists believe the Bank of Canada will be content to remain on the sidelines in June.

Concordia University professor Moshe Lander told Global News on Tuesday that the central bank could view the April inflation uptick as “just a blip” and wait for more data — particularly concerning wage growth in Canada’s tight labour market — before moving again.

“I don’t think that the Bank of Canada is worried,” he said.

“They understand that (taming inflation is) not a linear progression … there will be bumps along the way.”


Click to play video: 'Poilievre claims Liberals’ deficit spending contributes to burden of inflation on Canadians'


Poilievre claims Liberals’ deficit spending contributes to burden of inflation on Canadians


RBC economist Claire Fan said in a note Tuesday that the Bank of Canada’s rate hikes to date are now starting to show signs of “weighing on economic growth,” suggesting inflation pressures will continue to ease. RBC expects the central bank’s key rate will remain on hold for the remainder of 2023.

Story continues below advertisement

Bank of Canada governor Tiff Macklem could provide hints about how policymakers are processing the latest inflation print when he speaks to reporters Thursday morning following the release of the central bank’s financial system review.

&copy 2023 Global News, a division of Corus Entertainment Inc.




The Bank of Canada is facing renewed calls for another interest rate hike after a surprise uptick in inflation last month.

The annual inflation rate in April rose slightly to 4.4 per cent, compared with 4.3 per cent in March, Statistics Canada reported Tuesday.

The central bank has kept its key rate on hold in two consecutive decisions after a rapid hiking cycle that saw the benchmark rate rise 4.25 percentage points over the course of a year.

Bank of Canada policymakers said the pause is conditional on inflation returning to three per cent by mid-year and left the door open to additional rate hikes “if needed.”


Click to play video: 'Bank of Canada keeps key interest rate on hold again: Tiff Macklem'


Bank of Canada keeps key interest rate on hold again: Tiff Macklem


Money markets continue to expect the central bank will hold steady at its next decision on June 7, but odds of a hike next month rose to roughly a one in three after the inflation surprise on Tuesday.

Story continues below advertisement

Derek Holt, the head of Scotiabank Capital Economics, is among the voices on Bay Street expecting another interest rate increase — and sooner, rather than later.

Holt said in a note to clients on Wednesday that if the Bank of Canada does need to increase its benchmark rate, which sets the cost of borrowing for lenders and their customers, it’s better to do it early.

If business and consumer expectations for inflation remain elevated for longer, it’ll make it that much harder to get price pressures back under control and hit the Bank of Canada’s two per cent target, Holt argued.

“If the BoC doesn’t adopt the crush it, killer mentality, then it may never succeed in getting inflation down to (two per cent),” he wrote.

Holt also said the central bank is willing to surprise the markets with rate hikes, as market odds were wrong about the magnitude of rate increases in three of the eight decisions during the cycle.

Jay Zhao-Murray, an analyst at Monex Canada, said in a note earlier this week that in addition to the headline inflation figure rising in April, the central bank’s preferred measures tracking so-called “core inflation” accelerated on a three-month basis. These figures still cooled on an annual basis.

These concerns, in addition to signs the housing market correction has bottomed and sales activity is on the rise again this spring, could force the Bank of Canada to make an “insurance hike” in June, Zhao-Murray said.

Story continues below advertisement

Other economists believe the Bank of Canada will be content to remain on the sidelines in June.

Concordia University professor Moshe Lander told Global News on Tuesday that the central bank could view the April inflation uptick as “just a blip” and wait for more data — particularly concerning wage growth in Canada’s tight labour market — before moving again.

“I don’t think that the Bank of Canada is worried,” he said.

“They understand that (taming inflation is) not a linear progression … there will be bumps along the way.”


Click to play video: 'Poilievre claims Liberals’ deficit spending contributes to burden of inflation on Canadians'


Poilievre claims Liberals’ deficit spending contributes to burden of inflation on Canadians


RBC economist Claire Fan said in a note Tuesday that the Bank of Canada’s rate hikes to date are now starting to show signs of “weighing on economic growth,” suggesting inflation pressures will continue to ease. RBC expects the central bank’s key rate will remain on hold for the remainder of 2023.

Story continues below advertisement

Bank of Canada governor Tiff Macklem could provide hints about how policymakers are processing the latest inflation print when he speaks to reporters Thursday morning following the release of the central bank’s financial system review.

&copy 2023 Global News, a division of Corus Entertainment Inc.

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