Members of the Board of Directors of the Bank of Canada believe that the time has come to reduce interest rates while others believe that we must wait because there are risks that inflation starts to rise again.
This division is reflected in the report of the deliberations held at the highest level during the week preceding the April 10 decision to maintain the rate at its level of 5% made public on Wednesday.
The document says nothing about the tone of these discussions, but it indicates for the first time a real divergence of views at the Bank of Canada since the start of the fight against inflation.
“Despite their differing views on the degree of additional assurance needed to have confidence that inflation was on a sustainable path back to the 2% target, they agreed by consensus to maintain the rate at 5%. “, we can read in the document.
Two subjects dominated the discussions of central bank leaders: the good performance of the American economy and the impact of population growth on inflation in Canada.
Stronger-than-expected growth in the United States economy should continue to support the Canadian economy, the central bank believes.
As for the sharp increase in population, it will have an impact on the cost of housing and on inflation, according to the Bank of Canada. A reduction in rates will accelerate activity in the housing market and fuel inflation, she believes.
“Easing monetary policy could increase the likelihood that this risk materializes, regardless of when the easing cycle begins,” the leaders agreed.
While everyone agrees that inflation is moving in the right direction, those who believe that the time has not yet come to lower rates have won their case. And when the time is right, the declines will be gradual, they predicted.
“Members had differences of opinion as to when conditions would likely be met to justify a reduction in the policy rate,” the document reads. But they agreed that monetary easing would likely be gradual.”
The Bank’s next rate decision is June 5.