Bank of Canada Says It Will Not Follow Fed’s Lead on Rates

If the U.S. Federal Reserve raises interest rates the Bank of Canada would not necessarily be pressured to follow suit, one of the Canadian central bank’s economists said on Thursday.

Economist Rhys Mendes told the House of Commons finance committee that the Bank of Canada would view a Fed rate hike as a sign the U.S. economy is strengthening, which would be good for Canada.

Asked whether a U.S. rate hike would put pressure on the Bank of Canada to also raise rates, Mendes replied: “Not necessarily. The bank targets inflation in Canada and decisions regarding monetary policy in Canada would be based on the outlook for inflation.”

The Bank of Canada shocked markets by cutting rates in January to provide what it called insurance against the damage done to the economy by dropping oil prices. Canada is a major oil producer.

Mendes told the committee that in the absence of any monetary policy response to falling oil by the bank, overall Canadian output would have been about 1.4 percent lower by the end of 2016.

via Reuters

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.