The BoC sees inflation hitting 3% this summer, but it has said getting to 2% may take time as services costs are proving sticky and wages continue to grow, in part because of a tight labor market and better-than-expected growth in the first quarter. "Governing Council acknowledged that the labor market was still tight and the slowing in growth would likely come a little later," the minutes said. "Governing Council agreed that ... there was a sense that the economy was proving a little stronger than expected." (Reporting by Steve Scherer and Ismail Shakil; Editing by Mark Porter)
By Steve Scherer and Ismail Shakil
OTTAWA, April 26 (Reuters) - The Bank of Canada (BoC)
did not hike interest rates earlier this month because it wanted
to see more evidence of the effects of previous monetary
tightening on growth and inflation, according to minutes from
the policy-setting meeting released on Wednesday.
The minutes showed that the six members of the governing
council noted that growth had been slightly more robust than had
been forecast in January, and that they were concerned that
lowering inflation toward its 2% target in the second half of
this year could be difficult.
On April 12, the central bank left its key overnight
interest rate on hold at 4.50% for a second time in a row but
struck a hawkish tone, playing down market expectations for a
cut this year as the risk of a recession diminished.
"The case to maintain the policy rate at 4.50% reflected
Governing Council's view that headline inflation is coming down
quickly in line with the Bank's forecast and that more evidence
would be needed to assess whether monetary policy was
sufficiently restrictive," the minutes said.
The BoC last month became the world's first major central
bank to pause its tightening campaign. Governor Tiff Macklem
said he wanted to let the eight previous rate hikes sink in and
would hold off on further increases as long as inflation came
down as forecast.
Inflation peaked at 8.1% last year and has since come down,
reaching 4.3% in March.
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