The Bank of Canada has increased its target for the overnight rate by 25 basis points four times in a row, from 2.50% to 3.50%, and if its January monetary policy report is anything to go by, it seems intent on continuing this trend. Output continues to hover around the Bank's estimate of capacity, and even though the overnight target is 100 basis points higher than it was last summer, that increase is from a very low base. It's unlikely that the Bank feels that its objective of withdrawing stimulus has been attained yet. But it won't be long before increasing interest rates will be actually contractionary, and since the medium-term outlook doesn't look good, the Bank will have some tricky judgment calls to make over the next few months.
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