• Notes From The Desk | Not On Autopilot

Notes From The Desk | Not On Autopilot May 12 2022

Not On Autopilot – The Bank of Canada amidst the perfect storm.

In yesterday’s speech (“the perfect storm”), Toni Gravelle, Deputy Governor of the Bank of Canada shared some insights into the BoC’s thinking.

  • The policy rate needs “to be at neutral levels to help cool demand”, somewhere between 2-3%


  • We could see a pause in the hikes once in the 2-3% range
    • “If price increases reversed course “(i.e. commodity prices decline, shift in demand from good to services easing supply chain issues)
    • If there is a “larger-than-expected slowdown due to higher indebtedness and unsustainably high housing prices”


  • What could see the policy rate go above the 2-3% range
    • If supply chain issues persist
    • If there is a “stronger boost in consumer spending” “Because parts of the economy may be less sensitive to rate hikes than in the past,” due to pandemic savings and “stronger demographic demand from immigration”

His big conclusion.

These considerations should make it clear that we are not on a pre-set path of policy rate increases aimed at getting to a specific “terminal” rate. Our decisions are not on autopilot.

Full Speech: https://www.bankofcanada.ca/2022/05/the-perfect-storm/

Share this...
Share on email
Share on linkedin