In an address on November 9, 2023, Carolyn Rogers, the Senior Deputy Governor of the Bank of Canada, provided crucial insights into the country’s monetary policy and interest rate trends. Speaking in Vancouver, Rogers underscored that higher interest rates are effectively easing price pressures in Canada. However, she noted that the progress toward the 2% inflation target is slower than expected, with inflation projected to stay around 3½% for the foreseeable future.
Rogers also remarked on the significant changes in the Bank’s overnight target rate, which has seen a dramatic increase of 475 basis points in just 16 months, marking its fastest pace ever. She indicated that certain forces that maintained interest rates at record lows during the pandemic are now diminishing. Additionally, Rogers warned that it might be premature for the Bank of Canada to consider interest rate cuts until there’s solid evidence supporting such a decision.
A key message from Rogers was the need for Canadians to brace for higher interest rates in the long run. She cautioned that the era of ultra-low rates experienced before the COVID-19 pandemic might not return, advising households and businesses to prepare for borrowing costs higher than those experienced in the past 15 years. This change reflects the substantial rise in interest rates since mid-2021.
The Bank of Canada has aggressively raised interest rates, with the key rate target reaching 5.0 percent, the highest level since 2001. These remarks by Rogers signal a significant shift in the Bank’s approach to monetary policy, indicating a new era of financial management and expectations for Canadian businesses and consumers.
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