BoC held its key overnight interest rate at 0.25 per cent on Wednesday, but nudged forward its guidance on a hike as soon as April 2022
The shock from the pandemic means that “the circumstances are very different” in 2021 than they were 18 years ago, Dodge said in a telephone interview.
That shift is “more or less right, finally,” Dodge said. Before Wednesday, many economists had said that inflation was going to be more persistent than the central bank had forecast. “What the bank is saying, and quite rightly, is that the upward movement in inflation over the period that we are in … turned out to be a bit bigger than they had expected. So that’s not totally surprising, and forecasts are forecasts, right?” he said.
“But what they’re also saying is that they think it’s going to go on now a bit longer than they had anticipated, which I think is right, and they are reacting to that,” he added. Dodge said rates would start rising again next year, and that the central bank’s message was that it would focus on the underlying economic data while setting policy, which he said was “exactly right.”
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