The Bank of Canada building is pictured in Ottawa, Tuesday, Dec. 6, 2022. Kozicki says concerns around the stickiness of inflation helped push the bank to make its half percentage point increase Wednesday. THE CANADIAN PRESS/Sean Kilpatrick
MONTREAL – Bank of Canada Deputy Governor Sharon Kozicki says concerns around the stickiness of inflation helped push the bank to make its half percentage point increase Wednesday while noting it could be the last rate hike of the cycle.
Speaking in Montreal before the Institut de développement urbain du Québec, Kozicki said history shows high expectations around inflation can lead to more persistent inflation.
She says that while activity in interest-sensitive areas such as housing have started to respond to rising rates, other areas like hotels and restaurants still show overheated demand and food prices continue to increase.
Kozicki says that while inflation numbers are on the decline, overheated demand means the bank has had to continue to be forceful in its rate increases.
The bank’s half-percentage point rate increase to 4.25 per cent, the highest since 2008 after seven consecutive increases this year, was higher than the quarter percentage point many were expecting.
Kozicki said that going forward, rate decisions will be data-dependent as current rates work their way through the economy, signalling a shift at the bank from how much to raise interest rates, to whether to raise interest rates.
This report by The Canadian Press was first published Dec. 8, 2022.
