The Bank of Canada’s deputy governor says it may need to raise its prime interest rate to three percent or more to ensure inflation doesn’t settle for a longer period.
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“We fear this inflation will ensue,” Paul Baudry told reporters on Thursday afternoon.
In an earlier speech to the Gatineau Chamber of Commerce, he said the prospect of even higher consumer prices on the horizon means the central bank will consider pushing its policy rate to at least the top end of its “neutral” range- Percentage between two and three, which neither induces nor inhibits growth.
“Price pressure is building up and inflation is much higher than we expected and is still likely to be higher before lowering,” Bydry said Thursday morning.
“This raises the possibility that we may need to raise the policy rate to the top end or above the neutral range to balance demand and supply and keep inflation expectations well.”