Rate hike spec­u­la­tion ramps up

The Guardian (Charlottetown) - - BUSINESS -

OT­TAWA — Spec­u­la­tion that the Bank of Canada is pre­par­ing to raise its key in­ter­est rate con­tin­ued to ramp up af­ter gov­er­nor Stephen Poloz’s lat­est com­ments to a Ger­man news­pa­per pub­lished Tues­day. While talk about a pos­si­ble rate hike by the Bank of Canada has in­creased, in­fla­tion in Canada has re­mained low. How­ever, Poloz said in the in­ter­view with Han­dels­blatt last week that there is a sub­stan­tial lag be­tween when the econ­omy ap­proaches full ca­pac­ity and when that be­gins to trans­late into in­fla­tion.

He said if the cen­tral bank only watched and re­acted to in­fla­tion, it would never reach its in­fla­tion tar­get and it would al­ways be two years be­hind in the re­ac­tion.

Poloz noted that he has to look at other in­di­ca­tors in the mod­els that pre­dict in­fla­tion.

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