Carney shows hawkish instincts by hinting at an interest rate rise

Kasmira Jefford
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THE BANK of Canada yesterday held interest rates at one per cent and hinted that a rate rise could come in the near future.

That hawkish note comes despite fears the US “fiscal cliff” could send the world economy tumbling, and marks a stark contrast to the very loose policies of the Bank of England, which Canadian governor Mark Carney will lead from July.

In a statement accompanying the decision, the Bank of Canada gave a relatively upbeat assessment of the global economy, noting Chinese growth is stabilising and the US economy is growing slowly but steadily. That recovery means inflation should rise in the future, meriting a rise in interest rates.

“Over time, some modest withdrawal of monetary policy stimulus will likely be required, consistent with achieving the two per cent inflation target,” said the Bank.