Most read from Bloomberg Deputy Governor Sharon Kozicki reiterated the central bank’s “unwavering commitment” to overturn inflation to the 2% target and said more aggressive action would be discussed – including shrinking government bonds, known as quantitative easing. He acknowledged that while rising borrowing costs were affecting Canadians differently, higher price pressures were “particularly painful” for low-income people. “I expect that the pace and magnitude of interest rate hikes and the start of QT will be active parts of our discussions in our next decision in April,” Kozicki said on Friday. He also warned that Russia’s war in Ukraine was driving inflation higher than expected in the bank’s most recent quarterly forecast. The remarks, made by teleconference to the Federal Reserve Bank of San Francisco, come three weeks after the Bank of Canada raised its policy rate to 0.5% from a low of 0.25% after the shock. of Covid-19 in North America. Ahead of the speech, markets priced at least nine more 25-point increases over the next year. The traders increased those bets, with her comments boosting expectations for a bigger move next month. “This is a clear nod to the possibility of a 50 basis point increase at the April meeting,” said Benjamin Reitzes, a senior general at the Bank of Montreal, via email. “The door is wide open.” The comments helped boost the Canadian dollar, which rose above $ 1.25 C $ for the first time since January, to $ 1.2481 at 2:15 p.m. Ottawa time. The story goes on They also accelerated bond sell-offs: the 10-year benchmark yield in Canada rose as much as 2.536%, up about 14 basis points. The rise in Canada’s returns reflects moves in the Treasury market, where traders are pricing even higher increases for the Federal Reserve, with several US central bank policymakers saying there is a 50-point increase at the table. Kozicki’s speech shows that the Bank of Canada is ready to act quickly and vigorously to quell inflationary pressures, which reached a three-decade high of 5.7% in January from a year earlier. He also cited the bank’s concerns about rising inflation expectations due to persistently high price gains. Her remarks highlighted that differences in household wealth, debt and income can exacerbate economic shocks and influence decisions about fiscal and monetary responses. However, Kozicki said that while debt risks persist, the bank believes that “on average, households appear to be in better financial shape now than at the beginning of the 2017-18 tightening cycle”. While Kozicki said high debt levels remain a major domestic vulnerability, the strong labor market and significant savings accumulated during the pandemic have softened the balance sheets of Canadian households. (Market updates, analysts’ reaction.) Most read by Bloomberg Businessweek © 2022 Bloomberg LP
