MNI: Bank of Canada Discussed Delaying Oct Rate Cut- Minutes

Bank of Canada officials discussed delaying cutting interest rates before agreeing to go ahead according to minutes of the Oct. 29 decision published Wednesday.

"While members agreed that a cut to the policy interest rate would be needed, they had a range of views about the timing of the cut," according to the Summary of Deliberations. 

"Waiting to cut the policy rate at a future meeting would provide Governing Council with more information on the economy," the report said. "With continued excess supply, labour market weakness, tepid growth expected in the second half of the year and inflation projected to stay close to the target, the arguments for cutting the policy rate in October were considered more salient." 

Governor Tiff Macklem and deputies found that while future U.S. tariffs remain uncertain, there was more evidence of weakness that will help keep inflation near their 2% target, the report said. "Targeted sectors, including automobiles, steel, aluminum and lumber, have been severely hit, but lower demand from the United States for Canadian goods and services was affecting the rest of the economy as well."

Officials expected "choppy" inflation in coming months because of base effects related to a federal sales tax holiday and the elimination of a carbon tax. 

The policy rate was lowered 25bps to 2.25% at the meeting and Macklem told reporters if the Bank's economic forecast is realized borrowing costs are at about the right level to control inflation and help support the economy. Structural changes related to new trade dynamics could take a long time to occur, the minutes said. 

“If new information led them to conclude the outlook had changed materially, they were prepared to adjust the policy interest rate,” the report said. (See: MNI INTERVIEW: Supply Damage Supports BOC Hold- Dal's McNeil)