The latest deliberations within BoC have revealed a divide among officials over the course of monetary policy, as they confront the challenge of reigning in inflation without further rate hikes. At the heart of the debate is whether the current 5.00% policy rate will suffice in guiding inflation back to the targeted 2%.
The minutes from the October 25 meeting, where BoC maintained the interest rate, reflect this uncertainty. A faction within the bank is leaning towards additional tightening measures. “Some members felt that it was more likely than not that the policy rate would need to increase further to return inflation to target,” the minutes read, highlighting concerns that the current policy stance may not be enough to temper rising prices.
On the flip side, there is a sense of cautious optimism among other members, who believe that maintaining the current rate might achieve the desired effect over time. “Others viewed the most likely scenario as one where a five per cent policy rate would be sufficient to get inflation back to the two per cent target, provided it was maintained at that level for long enough,” the minutes elaborated.
This divergence in views has culminated in a consensus to adopt a “patient” approach, reflecting a strategy of watchful waiting while assessing incoming data. “They agreed to revisit the need for a higher policy rate at future decisions with the benefit of more information,” according to the documented discussions.
