By David Ljunggren
OTTAWA, Dec 23 (Reuters) – Ahead of the Bank of Canada’s rates decision on December 10, Governing Council agreed it was hard to predict whether its next move would be a hike or cut, according to minutes of the meeting released on Tuesday.
Two important reasons are unpredictable U.S. trade policy and recent volatile economic data, the seven-member rate-setting council concluded.
Governors agreed to hold rates at 2.25%, the level they felt was appropriate to keep inflation close to the bank’s 2% target as long as its economic outlook remained broadly consistent.
The bank says it is ready to act again if need be, either to curb rising prices or help a weak economy.
“Governing Council … discussed whether it was more likely that their next move would be to raise or lower the policy interest rate,” said the minutes.
“Given the high level of uncertainty, members agreed that while the current policy rate was at about the right level in the current situation, it was difficult to predict when and in which direction the next change in the policy rate would be.”
Money markets are predicting the Bank’s next move will be a 25 basis point hike, most likely in October 2026.
The council said a 2026 review of the U.S.-Mexico-Canada free trade pact was “a significant risk” and said uncertainty over the outcome would likely weigh on business investment.
“If a significant new shock were to materialize, or an accumulation of evidence indicated that the evolution of economic activity and inflation was materially different from what they expected, Governing Council was prepared to respond,” the minutes said.
In addition, volatility in recent quarterly GDP data “was an indication of how challenging it will be to assess the underlying trends in the economy”, it said.
Canada’s economy grew at a much faster pace than expected in the third quarter as crude oil exports and government spending boosted economic activity and imports plunged.
(Reporting by David Ljunggren, editing by Fergal Smith)
((Reuters Ottawa editorial; david.ljunggren@tr.com)))
Keywords: CANADA CENBANK/
