The Bank of Canada has revealed three key points of discussion from its meeting minutes when its Governing Council made the decision on 22 March to leave the benchmark rate at 4.5%. The three points relate to the banks view on Canada’s labour market; the level of employment it associates with an overheating economy; and the challenges posed by current levels of federal government spending. In terms of the labour view, Canada’s central bankers noted that faster immigration rates and a stronger rebound in labour participation rates were likely to help satiate demand for workers, while high levels of household debt remained a stumbling block as it makes Canada more vulnerable to negative demand shocks than the US. Meanwhile, policymakers agreed that the level of employment was running above maximum sustainable levels, and the most aggressive series of interest rate hikes in the bank’s history had not done enough to cool hiring. Finally, the bank said it was keeping a close eye on government spending, which has been stronger than anticipated in Q4. If this continues, the bank might need to act to offset any additional demand created.

“Insights on Interest Rates: Decoding Bank of Canada’s March Minutes by Kevin Carmichael in 3 Points”

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