Hot economy, inflation were at crux of BoC's last rate decision: summary

Tiff Macklem
Bank of Canada governor Tiff Macklem | Chung Chow, BIV

OTTAWA — The Bank of Canada’s first-ever summary of deliberations reveals that the governing council ultimately decided to raise its key interest rate last month because of ongoing strength in the economy.

The decision to hike by a quarter of a percentage point on Jan. 25 came after the central bank discussed the risk that inflation would get stuck above two per cent down the line.

The Bank of Canada’s governing council unanimously agreed that the bank's action to date had been forceful and the full economic effects of rate hikes have not yet been felt.

The tight labour market and strong GDP readings were the rationale behind the governing council's ultimate decision to raise its key interest rate.

With the rate hike, the central bank also indicated that it would take a conditional pause to assess how the economy is responding to higher rates.

After some deliberation on what forward guidance the central bank should give, governing council members agreed to signal a pause to convey that the bar for raising rates further is now higher.

This report by The Canadian Press was first published Feb. 8, 2023.

The Canadian Press