Published June 4, 2022 1:00 pm est
by Richard F. Cason, 
Editor in Chief,
NewsMovesmarketsForex
Key Take away’s-
- Bank of Canada, (BOC), Lifts Interest Rate by .50 basis points to 1.50 percent on June 1, 2022
- BOC continues to also initiate on going Quantitative Tightening Policy
- Inflation remains the driving force propelling consistent rate hikes, global and domestic increased food and energy prices are at the forefront the economic dilemma
- Residential housing markets are moderating, CPI remains above the 3% normal levels, April CPI Inflation increase to 6.8%
- Inflation concerns have vastly increased elevating the risk of becoming systemically entrenched in the interim
- Labor markets are reporting vast Labor shortages, wage growth has began to pick up, wage pressures are intensifying
- Russian Ukraine conflict has disrupted global supply chains, China’s COVID-lockdowns, continues to disrupt normal commerce activities weighing heavily on boosting inflationary concerns pushing international agricultural commodities and energy prices higher
The Bank of Canada Lifts interest rates to 1.50 percent on June 1, 2022. This is the second consecutive months of rate hikes implemented by the Governing Council; which also signaled that it will continue to raise policy interest rates until inflation has tempered. The Governing Council has continue to adopt on going quantitative tightening policy for the near term. BOC Bank Rate at 1.75 percent, and the deposit rate is at 1.50 percent.
In a Press conference held on June 2, 2022, Deputy Governor Paul Beaudry after his speech on key issues behind the Bank Of Canada rate decision, responding to various reporters question, the Deputy address a question referencing how the Central bank council plans to get rid of inflation opposed to going into a recession, said that: “…its a difficult balance often in monetary policy, what your trying to do is balance different aspects and what we are trying to do now is to get that inflation back down to 2% that’s our mandate, we will do what’s needed to get that aspect, we think that it can be done by properly communicating to people to what we are doing and how they take that in account, that given that there is excess demand in the economy we can bring that back down slowly and get back to the economy without kind of going into a recession we’re aiming for this to be a soft landing, but it is a difficult compromise, if you do to little, an you kind of allow inflation to keep on going, and not becoming entrenched that’s not our goal and if we do too much you might kind of bring the economy into recession; were trying to aim that in between and large part of that is that people know what we are doing and why we are doing it and with that we think we can kind of reign this in without necessarily getting into a recession type area.”
Canadian Economy is relatively Strong,1st Quarter GDP Growth of 3.1%, Labor Markets show high job vacancies, widespread shortages
BOC also reports that…”Canadian economic activity is strong and the economy is operating in excess demand. According to National account data for showed the first quarter of GDP growth of 3.1 percent. Job vacancies are elevated, companies are reporting widespread labour shortages, and wage growth has been picking up and broadening across sectors. Housing market activity is moderating form exceptionally high levels.?
Governing Council expects inflation to move higher in near term, and future Rate Hikes are Expected to Combat Inflation Concerns
According to the Bank of Canada governing council: “The policy interest rate remains the Bank’s primary monetary policy instrument, with quantitative tightening acting as a complementary tool. The pace of further increases in the policy rate will be guided by the Bank’s on going assessment of the economy and inflation, and Governing Council is prepared to act more forcefully if need to meet its commitment to achieve the 2% inflation target.”
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