​Bank of Canada doesn’t need to hike rates any further: Economist

Signs of headline inflation slowing down in Canada should be enough for the country’s central bank to hold off on any further rate hikes, one economist says.

Canada’s headline inflation came down in June at 2.8 per cent year-over-year, according to data released by Statistics Canada on Tuesday. However, core medium inflation, which excludes volatile items such as gasoline and food prices, remained unchanged at 3.9 per cent on a yearly basis, the figures showed.

Since headline inflation is cooling, while core inflation remains sticky, Pedro Antunes, chief economist at the Conference Board of Canada, believes that the Bank of Canada will not raise rates any further — but will keep them elevated in order for the full effects to be felt throughout the economy.

“We don’t need to press the brakes any higher, and I think the bank will wait and see now going forward,” he told BNN Bloomberg in a TV interview on Tuesday.

Antunes explained that while today’s data proves the bank has been successful in fighting headline inflation, things like elevated food prices and mortgage interest costs, are still too high for them to ease monetary policy measures.

“One of the big contributors is the mortgage interest cost portion — that’s another piece as we see interest rates stabilizing we should hopefully see that moving down as well,” he noted.

Unfortunately, food prices are at risk of rising even further, he cautioned.