The Bank of Canada agreed that the need for further rate hikes would be determined by fresh economic data after it lifted rates to a 22-year high earlier this month, minutes from their policy meetings released on Wednesday showed.
Analysts said the tone of the notes made it clear the central bank was likely to raise rates again next month.
On June 7 the bank, which had been on hold since January, raised its overnight rate to 4.75%. In its summary of deliberations, or minutes, the governing council said growth and inflation had been stronger than expected.
“Members were of the view that with the resurgence in household spending growth, the pickup in consumer confidence, and the slowing in disinflationary momentum, monetary policy did not look to be sufficiently restrictive,” the minutes said.
The governing council discussed whether to signal a rate increase and then execute it in July, but decided there was enough data to act immediately.
The council then agreed to “assess the need for further policy rate increases based on the incoming data.” The council was concerned inflation could become stuck at a level materially above the bank’s 2% target.
Money markets see a roughly 72% chance that the bank will raise its policy rate by 25 basis points on July 12.
“It’s all about the data … for now, we continue to look for a hike in July,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets.
After the minutes were released, the Canadian dollar was trading at a nine-month high of 1.3162 to the greenback, or 75.98 U.S. cents, up 0.5% on the day.
“We don’t believe Canadian central bankers are done with rate hikes just yet … the key concerns that policy-makers outlined in today’s summary of deliberations will likely still be unnerving in a few weeks,” said Tiago Figueiredo, a macro strategist at Desjardins.
Ahead of the June hike, statistics showed April annual inflation accelerated for the first time in 10 months to 4.4%, and first-quarter GDP rose 3.1% – versus the central bank’s 2.3% forecast – driven in part by consumer spending.
Since the June decision, Canada unexpectedly shed jobs in May, a possible first sign of a softening in the labour market. But the latest retail sales report for April and a May estimate issued on Wednesday suggest consumer spending remains strong.
The governing council said it expected second quarter growth would outpace the 1% annualized pace it forecast in April.
“Governing Council agreed that the economy remained clearly in excess demand and that the rebalancing of supply and demand was likely to take longer than previously expected,” the minutes said.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
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