By Promit Mukherjee
OTTAWA, Sept 16 (Reuters) - Ahead of the Bank of Canada's September 2 interest rate decision, governors agreed inflation was likely to remain elevated in the near term, minutes of the meeting showed on Wednesday.
The BoC kept its key policy rate on hold at 2.25%, but Governor Tiff Macklem said policymakers were prepared to raise borrowing costs multiple times if inflation remained too high.
Here are the details from the summary of deliberations released by the bank:
• There was little evidence that higher gasoline prices were passing through broadly to the price of other goods and services
• However, members concluded that given the heightened tensions in the Middle East, protracted conflict and damage to refining capacity, gasoline and diesel price would stay high, leaving headline inflation higher for longer that the BoC's own forecast in July
• Trade actions on both sides of the U.S. border would also add to business costs, which could be eventually passed on to consumers, impacting inflation
• Members agreed that if higher energy prices did spill over into other components of the consumer price index, a monetary policy response would be needed to prevent inflation from setting in
• The rate-setting team acknowledged that incoming data since the BoC's July monetary policy report showed the economy and inflation had largely evolved in line with its expectations. But the main risks to the forecasts had become more acute, it added
• Members noted growth was broadening and the labor market was improving but the economy was still in excess supply
• The Governing Council team agreed that the breakdown in trade negotiations with the United States, new tariffs and threats of further trade measures made growth prospects and sustainability of the recent recovery more uncertain
(Writing by Promit Mukherjee, editing by David Ljunggren)
((Reuters Ottawa editorial; david.ljunggren@tr.com, opens new tab))
Keywords: CANADA CENBANK/
