Bank of Canada risks falling too far behind Fed, says Scotia
Sunday, 12 March 2023
The Bank of Canada is constrained in how much it can lag interest rate hikes behind those of the Federal Reserve, and the gap threatens to weaken its currency and fuel inflation, according to a Bank of Nova Scotia economist. . Canada's central bank was able to adjust less than the Fed in previous cycles when core inflation north of the border was cooler, but that's not the case right now, Derek Holt, head of capital markets economics, said in a note dated March 3. Canada, inflation is still too high, inflation expectations are rising and the weakening Canadian dollar is showing warning signs," he said. “The magnitude of the policy rate deviation between the Fed and the BoC relative to differences in their macroeconomic circumstances concerns me to what extent the BoC is supposed to be able to lag the Fed,” Holt said. The Canadian dollar has fallen to around $1.36 as of Friday, down from $1.34 when Bank of Canada Governor Tiff Macklem declared a conditional pause on his rate-hike campaign. The bank is expected to keep its overnight interest rate at 4.5% in a decision to be released on Wednesday.
- Published in NEWS TRUSTIN, TIPS TRUSTIN
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