"As the Federal Reserve starts to tighten interest rates, we’re going to quite naturally import some of that rise and in fact we have seen that." – Carolyn Wilkins, Bank of Canada
As markets expected, the Bank of Canada left its monetary policy unchanged at its meeting on Wednesday amid strong economic performance. The BoC Governor Stephen Poloz said that the Bank would maintain its neutral stance despite an upward revision to economic growth forecasts for this year. However, Poloz sounded less dovish than at the January policy meeting, when policymakers discussed a possible rate cut. Nevertheless, the Bank stated that the economy continued to operate with material excess capacity and both business investment and pay growth remained subdued. Poloz pointed also to surging housing prices, adding that the sharp price rise was not driven by any fundamentals. Indeed, house prices in Toronto jumped more than 33% in March compared to a year ago. Later in the day, Poloz said that it would be wrong for the Bank to try to offset drivers that boost the Canadian Dollar but added that the weaker currency would be beneficial for some sectors and the country’s exports. Meanwhile, the BoC Senior Deputy Governor Carolyn Wilkins said that even though the Bank ignored the recent hikes by the Federal Reserve, higher interest rates in the US would have a significant impact on Canada. After the release, the Canadian Dollar hit its six-week high against its US counterpart.
