Latest news with #governingcouncil
Globe and Mail
3 days ago
- Business
- Globe and Mail
Bank of Canada governing council split on need for more rate relief, summary says
The Bank of Canada's governing council is divided on whether more interest rate relief may be needed to navigate the economic slowdown caused by the trade war with the United States, according to a summary of the discussions ahead of last month's rate decision. The central bank held its benchmark policy rate at 2.75 per cent for the third consecutive time on July 30, citing the surprising reliance of the Canadian economy in the face of tariffs and recent hot inflation readings. There was consensus on the seven-member governing council, led by Governor Tiff Macklem, for a hold. But there were differing views about where monetary policy should go from here, and what role the bank should play in helping the Canadian economy adjust to a new global trading regime defined by U.S. protectionism. 'Some members held the view that, having reduced the policy interest rate to the middle of the Bank's estimated range of the neutral interest rate, and the economy showing some resilience to U.S. tariffs, the Bank may have already provided sufficient support to aid in this transition,' said the summary of the discussions, published Wednesday. The bank cut interest rates seven consecutive times in 2024 and early 2025, before hitting pause in April. 'Others highlighted that further monetary policy support would likely be needed given the estimated amount and persistence of slack in the economy, particularly if the labour market softened further,' the summary said. The bank has explicitly left the door open to further interest rate cuts, saying that more rate relief could be in the pipeline if the economic growth stalls and unemployment rises while inflation remains contained. But it has not committed to anything. Financial markets put the odds of another rate cut in September at around 30 per cent, according to LSEG data. Markets are betting on only one more quarter-point rate cut before the end of the year, although a number of Bay Street analysts are looking for two to three cuts before year end. U.S. President Donald Trump's erratic trade policy has made it difficult to assess where the Canadian economy is headed and what the correct stance of monetary policy should be. Trade wars are type of supply shock that both pushes up prices and slows down economic activity. That pulls central banks in different directions, forcing it to choose between lowering borrowing costs to cushion the the economy, and holding rates steady to prevent price jumps from morphing into persistent inflation. The summary reiterated that the Canadian economy has held up better than central bank economists expected, helped by a surge in exports in the first quarter and tariff carve-outs that have allowed most Canadian goods to continue trading tariff free. But that could change as tariff front-running goes into reverse in the second quarter, and uncertainty weighs on business investment and consumer spending. On inflation – the central bank's main guidepost – the summary noted that recent core inflation readings have come in slightly hot. Headline consumer price index inflation was only 1.9 per cent in June, although that number was pulled lower by the one-time removal of federal carbon pricing this spring. Core inflation measures, by contrast, are running around 3 per cent, while the bank thinks 'underlying inflation' is around 2.5 per cent. But the summary also suggested that the bank's outlook for inflation remains relatively benign, possibly bolstering the case for another rate cut. 'They noted that the impact of tariffs on consumer prices appeared to be modest so far. They also noted that wage increases and unit labour costs had continued to ease and the recent appreciation of the Canadian dollar had reduced import prices. There were no signs that inflation expectations had become de-anchored,' the summary said. Instead of publishing its usual forecast last month in its quarterly Monetary Policy Report, the bank decided to outline three possible paths for the Canadian economy that depend on the state of U.S.-Canada trade negotiations. If the status quo on tariffs is maintained, the Canadian economy would likely avoid a recession and inflation would remain around the bank's 2 per cent target, the bank estimated. If the trade war escalated, Canada could be in for a recession, while inflation would tick higher, according to the projection. 'In all three scenarios, inflation would remain within the band, with headline inflation peaking in the escalation scenario at around 2.5 per cent,' the summary said. 'While this provided some reassurance that price pressures would be contained, members judged the risks to inflation to be elevated given evident pressures on underlying inflation and the uncertainty around the impacts that tariffs and trade disruptions could have on Canada's economy over time.' Statistics Canada will be publish July inflation numbers next Tuesday. The next Bank of Canada interest rate decision is on Sept. 17.
CBC
3 days ago
- Business
- CBC
BoC officials considered whether interest rate already low enough to weather tariffs
Newly released documents show some members of the Bank of Canada were wondering last month whether the central bank's benchmark interest rate is already low enough to support the Canadian economy through U.S. tariffs. The Bank of Canada on Wednesday released the summary of deliberations from the meetings leading up to its decision on July 30 to hold the policy rate steady at 2.75 per cent. Those minutes show the central bank's governing council was fixed on how U.S. tariffs and the global trade "rewiring" were affecting inflation and the wider Canadian economy. The central bank's decision arrived just a couple days before U.S. President Donald Trump ratcheted base tariffs on Canada up to 35 per cent, while maintaining an exemption for goods compliant with CUSMA. Despite the ongoing uncertainty, monetary policymakers noted there were some signs of economic resilience heading into the rate decision. Rate cuts 'sufficient' to support economy The deliberations show some members wondered if the Bank of Canada had already provided "sufficient support" to guide the economy through its tariff transition. The central bank cut its policy rate seven consecutive times from June 2024 to March of this year in a bid to boost the economy as inflation showed signs of coming back under control. Economists say much of the impact from a monetary policy decision tends to take effect a year or more after the move, so many of those rate cuts are just now starting to stimulate the economy. WATCH | Bank of Canada held rates again in July: Bank of Canada 'ready to respond to new information,' Macklem says after holding rate 14 days ago Bank of Canada governor Tiff Macklem, when asked Wednesday if he sees the need for a rate cut this year, declined to forecast — but stressed that the bank is always watching for new information, especially around the Canada-U.S. trade situation. In that vein, the Bank of Canada governing council wondered whether cutting rates now, only for the economy to recover on its own, would only end up fuelling inflation down the road. "Given the lagged effects of monetary policy, there was a risk that further easing might take effect only as demand was recovering, which could add to price pressures," the summary read. Some forecasters, including RBC, have no further interest rate cuts in their base-case outlooks. Others on the Bank of Canada's governing council felt that signs of slack emerging in the economy could warrant additional rate cuts, particularly if the labour market started showing more weakness. If incoming data showed inflation wasn't straying too far from the central bank's target of two per cent, there could be a need for a lower policy rate, those members argued in the deliberations. No sharp rise in inflation with U.S. tariffs Alongside the rate decision, the Bank of Canada issued three scenarios for how the U.S. tariff situation could evolve: the status quo persists; there's a de-escalation in trade restrictions; and tariffs ramp up. The governing council noted that none of those scenarios showed a "sharp rise in inflation." Monetary policymakers said in deliberations that the impact of tariffs on consumer prices "appeared to be modest so far," but those effects were only just starting to show up in the data. "Members judged the risks to inflation to be elevated given evident pressures on underlying inflation and the uncertainty around the impacts that tariffs and trade disruptions could have on Canada's economy over time," the summary read. The Bank of Canada will get a fresh look at inflation figures for July and August ahead of its Sept. 17 interest rate decision.
Wall Street Journal
3 days ago
- Business
- Wall Street Journal
Bank of Canada Officials Divided on Rate Cut Outlook, Minutes Say
OTTAWA—Senior Bank of Canada officials debated the need for a rate cut ahead of its late July decision, with one camp believing they had provided enough relief to aid the economy through heightened trade uncertainty, according to minutes published Wednesday. Another group of policymakers, though, believed further rate relief would be necessary given the persistent level of spare capacity in the economy and labor-market softness, the minutes said. Ultimately, the seven members of the Bank of Canada's governing council opted to keep its policy rate unchanged at 2.75% on July 30, agreeing they needed to wait for more economic data before drawing conclusions.
Yahoo
3 days ago
- Business
- Yahoo
Some BoC governors wonder, has the central bank already cut its rate enough?
OTTAWA — Newly released documents show some members of the Bank of Canada were wondering last month whether the central bank's benchmark interest rate was already low enough to support the Canadian economy through U.S. tariffs. The Bank of Canada today released the summary of deliberations from the meetings leading up to its July 30th decision to hold the policy rate steady at 2.75 per cent. Those minutes show the central bank's governing council was fixed on how U.S. tariffs and the global trade 'rewiring' were affecting inflation and the wider Canadian economy. Despite the ongoing uncertainty, monetary policymakers noted there were some signs of economic resilience in Canada heading into the rate decision. The deliberations show some members wondered whether the Bank of Canada had already provided enough support by lowering its policy rate over the past year to guide the economy through its current tariff transition. Others felt that signs of slack emerging in the economy could warrant additional rate cuts, particularly if the labour market started showing more weakness. This report by The Canadian Press was first published Aug. 13, 2025. Craig Lord, The Canadian Press Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
3 days ago
- Business
- Bloomberg
Bank of Canada Weighed Cut In July, Opted to Wait for More Data
The Bank of Canada considered cutting interest rates at its last meeting, but trade uncertainty and sticky core inflation compelled officials to hold borrowing costs steady. Policymakers discussed a quarter percentage point cut at their July meeting, but the ongoing trade dispute with the US, the resilience of the Canadian economy and mounting risks to inflation ultimately led the bank's governing council to keep the policy rate at 2.75% for a third consecutive meeting.
