BoC adds fuel to the monetary policy debate
The Bank of Canada (BoC) has added some more fuel to the debate over the efficacy of monetary tightening in maintaining inflation-growth equilibrium under the current economic conditions. BoC hiked its key policy rate by 50bps to 3.75% on Wednesday, instead of the expected 75bps. BoC explained its decision to slow the pace of policy tightening in light of growing worries about a deeper global economic downturn. In the post policy statements, BoC said, “Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding”. Many observers are reading the change in stance of BoC as a template that may be followed by other central bankers also, especially the US Fed. It is pertinent to recall that two members of the Monetary Policy Committee (MPC) of RBI had also expressed similar views in the last meeting of the Committee. Obviously this d...