Canada’s Rate Hike Not As Soon As Expected

The Bank of Canada is still expecting economic easing to be absorbed in the middle quarters of 2022, but that does not necessarily mean in the second quarter according to statements by a key deputy governor on Tuesday, potentially dashing traders and investors; hopes across the market concerning an early rate hike.

In an audience question and answer session after a speech on labour market uncertainty, Deputy Governor Lawrence Schembri stressed that increases to the benchmark rate will only come when excess capacity is absorbed so that the central bank’s 2% inflation target is sustainably achieved.

“There’s a lot of uncertainty about the timing of the closing of the output gap, so one should be careful not assuming it’s necessarily going to be the second quarter. It’s a range of six months — that’s our best estimate”, Schembri added.