Bank of Canada governor Tiff Macklem acknowledged the central bank’s credibility has been shaken as inflation hits multi-decade highs and the institution faces criticism for not moving on rates sooner
that in hindsight, kicking off the rate-hiking cycle sooner this year would have been more prudent.
“The part that is more under our influence, is the recovery, and the excess demand and the faster-than-expected recovery, that accounts for about a quarter of the miss,” he said shortly after the July 13 rate decision. “That’s where, if we had known everything a year ago that we know today, yes, we probably would have started raising interest rates a little bit earlier. But we didn’t know.
Bay Street economists widely expected the first hike of the year to take place as early as the January meeting, but the Bank of Canada at 0.25 per cent. The central bank would take heat for the decision at the time, sparking criticism and confusion among the analysts who were certain that all the boxes for a rate increase had been checked.
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