Bank of Canada says data on rate hikes is data-dependent

Bank of Canada says data on rate hikes is data-dependent

OTTAWA Reuters - The Bank of Canada will study the latest economic data to determine whether or not to raise interest rates further, a deputy governor said on Thursday.

The central bank hiked its overnight interest rate by half a percentage point to the highest level in almost 15 years and signaled that it was near an end to its campaign.

Deputy Governor Sharon Kozicki said in a speech in Montreal that the bank is prepared to be forceful with rates if necessary, because we expect our decisions to be more data-dependent. We are moving from how much interest rates are to how much interest rates are to whether or not we want to raise interest rates. The central bank has lifted its rates at a record pace of 400 basis points in nine months to 4.25%, a level that was last seen in January 2008, to fight inflation that is far above its target.

With the labor market still tight and businesses still finding it easy to raise their prices, the Governing Council agreed that the economy still needs a more sustained moderation of demand, Kozicki said.

The bank cited still-strong growth and tight labor markets but removed the forward guidance it used since it began cranking rates higher in March, dropping language that said they would have to rise further.

Inflation, which clocked in at 6.9% in October, remains too high, at more than three times the bank's 2% target, Kozicki said. Three-month core inflation rates have declined to around 3.5%, an indication that momentum in inflation is easing Deliberations ahead of Wednesday's rate hike, which is centered on how supply challenges are resolving, how higher rates are slowing demand, and how inflation and inflation expectations are evolving, Kozicki said.

While third-quarter growth was strong, the softening demand in interest-rate sensitive areas like housing activity is evidence that tighter monetary policy is working to balance supply and demand, she said. The next policy-setting meeting will be on January 25.

The bank will release a summary of the deliberations next year in an effort to provide more transparency, according to Kozicki.

The Canadian dollar was trading 0.5% higher at 1.3580 against the dollar, or 73.64 U.S. cents.