Bank of Canada's July Decision Misunderstood by Some Traders, Senior Official Says

By Paul Vieira

OTTAWA--Some market participants initially misinterpreted the Bank of Canada's message regarding its July decision to cut rates as it pertained to downside economic risks, a senior central bank official said Thursday.

Back in July, the Bank of Canada said that downside risks had taken on increased weight in policy deliberations, given that inflation was nearing a 2% target and there was slack in the economy.

"Some people interpreted this to mean that we believed downside risks had strengthened," said Deputy Governor Nicolas Vincent, in remarks published on the central bank's website Thursday. "What we intended to communicate, however, was that, with the 2% target in sight, we gave increased consideration to the risk that inflation could fall below the target."

Vincent's remarks focused on how the central bank arrives at rate-policy decisions, and didn't touch upon the outlook for rate policy after the Federal Reserve's decision Wednesday to deliver a half-percentage-point rate cut. Nor did Vincent discuss data this week indicating Canadian inflation had reached the Bank of Canada's 2% target, and the implications for rate policy.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

September 19, 2024 08:48 ET (12:48 GMT)

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