What happened at the Bank of Canada’s policy meeting?

Image copyright Bloomberg Image caption How the Bank of Canada and US Federal Reserve impact each other

Weaker oil prices and a simmering trade war have prompted the Bank of Canada to raise interest rates further.

The key overnight rate, which the central bank controls, has now been hiked to 1.75% from 1.5%.

But Gregory Buma, deputy governor at the bank, said policymakers now had to be more focused on the financial system.

That would mean they need to be more careful how they communicate their policy moves.

“A signal of stability risks is part of the normal asset-pricing environment,” he said,

“For a little while, it is now felt that leaving an interest rate increase in place is simply not sufficient.”

Mr Buma also said that policymakers may take a wait-and-see approach to raising rates over the next few months.

He also said there had been a misunderstanding over the effects of rising interest rates on households.

“Domestic household consumption and home prices continue to grow somewhat at a faster pace than projected,” he said.

However, inflation remains low, and “market rates of interest appear to indicate that households may be more vulnerable to a higher interest rate environment”.

The Bank of Canada’s Wednesday policy meeting followed an overnight interest rate hike in the US on Wednesday, and signals the Fed plans to continue tightening policy for the next few months.

Mr Buma said other nations’ central banks should now do the same, and the relationship between central banks should be more closely monitored.

He did not say if this included the Bank of England, which is set to make an announcement on monetary policy on Thursday.

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