OTTAWA (Reuters) – The Bank of Canada raised interest rates on Wednesday, as expected, as job growth and firmer inflation outweighed the cloud of NAFTA uncertainty, but the head of the central bank admitted the decision was not a no-brainer.
In sounding a cautious tone on the future of the North American Free Trade Agreement as it raised rates for the third time in seven months, taking borrowing costs to their highest level since 2009, the bank accomplished the so-called dovish hike that many analysts had predicted.
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“We didn’t walk into this as if it was a no-brainer, that it was time to move rates. There was a good debate around that. It’s not that we were arguing but we were debating the pros and cons … the big cloud over the forecast, as well as our discussion, is NAFTA,” Governor Stephen Poloz told a news conference.
While more rate hikes are probably warranted, some continued monetary policy accommodation will likely be needed to maintain optimal growth and inflation, the bank said, signaling it will not rush to return rates to more normal levels after they were slashed to historic lows in the wake of the financial...
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