BOC Gravelle: Rates are too low. May have to lift rates above neutral

BOCs Gravelle is speaking now. Some comments:

• BOC will likely further lift is near term inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term forecasts
• Our current policy rate 1% is too stimulative
• It is possible bank may have to raise rates above neutral because parts of the economy might be less sensitive to hikes than in the past
• Stronger housing activity could also cause the BOC to lift rates past neutral
• On the other hand the bank may pause hikes as rate enters neutral range, and inflation starts to slow
• We could also see a larger than expected housing slowdown due to higher indebtedness and unsustainably higher housing prices
• Reiterates that the bank is prepared to be as forceful as needed when it comes to quickly normalizing the policy rate
• Main factor in recent C$ weakness despite higher commodity prices is likely strengthen of the US dollar US Dollar The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purel The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purel Read this Term
• Recent increasing commodity prices will likely boost business investment by less than half of what is typically expected, in part because investors expect demand for fossil fuels to moderate
• Slowdown in a growth does not have to mean high unemployment, by calling overall demand weekend reduce demand for labor and degree of labor shortages
• Broadening of the price pressures is a big concern but we are not seeing a repeat of 1970s style stagflation; inflation is much lower, economy is running pretty hot, job market is tight
• Employers could stop looking for new workers but keep the ones they have with little impact on the jobless rate; this is a scenario that delivers a soft landing

The USDCAD is moving to new session highs and above the high from earlier this week at 1.30515.