Bank of Canada governors were in agreement on June cut, deliberations show
After four consecutive months of easing core inflation and indications of further downward momentum in prices, members of the Bank of Canada‘s governing council agreed the time had come to cut rates in June, setting a new direction for monetary policy, a summary of their deliberations released Wednesday revealed.
The council had been divided on the timing of rate cuts prior to its previous interest rate announcement in April, but on June 5 the central bank cut its key overnight interest rate by 25 basis points to 4.75 per cent.
Though members of council did discuss whether to hold off on a cut until July in order to see additional inflation data, the trend in core inflation, which has remained below three per cent, provided enough confidence to go ahead with the June cut.
“Governing Council discussed how the accumulated evidence improved their confidence that progress toward the two per cent target would be sustained,” the bank’s statement read. “Members agreed that with further evidence showing that underlying inflation is easing and on a more sustained trajectory toward two per cent, monetary policy no longer needed to be as restrictive and a reduction in the policy rate was appropriate.”
The potential divergence of Canadian monetary policy and U.S. monetary policy and what that would mean for the Canadian dollar was also discussed.
“Members discussed many potential drivers that could affect the exchange rate, including market expectations for monetary policy divergence,” the statement read. “While members agreed there are likely limits to how far monetary policy in Canada can diverge from U.S. policy, the limits were not close to being reached.”
Despite the central bank’s confidence that the path to the inflation
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