Carney plots cautious rate path
Jeremy Torobin Globe and Mail
Mark Carney is taking a cautious approach to raising interest rates, weighing Canada’s powerful
economic rebound against the uncertainty of an “increasingly uneven” recovery across the globe.
The Bank of Canada Governor became the first central banker in the Group of Seven to raise
borrowing costs since the financial crisis and recession, increasing the benchmark overnight rate
Tuesday by one-quarter of a percentage point to a still exceptionally low 0.5 per cent.
Policy makers will keep an eye on Europe’s troubles, and won’t move more aggressively than they see
fit, the Bank of Canada suggested, even though the economy is rebounding rapidly and inflation will
likely exceed its 2-per-cent target this year. Much like in 2008 when the U.S. financial crisis pulled
Canada into recession, the country’s economic health depends in large part on policy makers in other
countries successfully containing homemade problems.
“Interest rates are incredibly low, given the strength of the domestic economy, but the global story is
where it’s at right now,” Eric Lascelles, chief economic strategist at TD Securities in Toronto, said in an
interview. “The level of uncertainty suggests there’s not a lot of confidence in the forecasts.’’ The
open-ended nature of the announcement sparked a fall in the Canadian dollar and yields on two-year
government bonds as investors pulled back their bets on what they had expected might be a series of
uninterrupted rate hikes going forward.
Mark Carney is taking a cautious approach to raising interest rates, weighing Canada’s powerful
economic rebound against the uncertainty of an “increasingly uneven” recovery across the globe.
The Bank of Canada Governor became the first central banker in the Group of Seven to raise
borrowing costs since the financial crisis and recession, increasing the benchmark overnight rate
Tuesday by one-quarter of a percentage point to a still exceptionally low 0.5 per cent.
Policy makers will keep an eye on Europe’s troubles, and won’t move more aggressively than they see
fit, the Bank of Canada suggested, even though the economy is rebounding rapidly and inflation will
likely exceed its 2-per-cent target this year. Much like in 2008 when the U.S. financial crisis pulled
Canada into recession, the country’s economic health depends in large part on policy makers in other
countries successfully containing homemade problems.
“Interest rates are incredibly low, given the strength of the domestic economy, but the global story is
where it’s at right now,” Eric Lascelles, chief economic strategist at TD Securities in Toronto, said in an
interview. “The level of uncertainty suggests there’s not a lot of confidence in the forecasts.’’ The
open-ended nature of the announcement sparked a fall in the Canadian dollar and yields on two-year
government bonds as investors pulled back their bets on what they had expected might be a series of
uninterrupted rate hikes going forward.