Bank of Canada Governor Mark Carney said the timing of interest-rate increases depends on growth accelerating to more than 2 percent, inflation picking up and households continuing to ease up on debt accumulation.
In an interview with Global TV, Carney said that while the Bank of Canada hasn’t been explicit about how long the current pause will last, it has outlined the factors that will influence the timing of the next move. Canada’s central bank has kept its benchmark borrowing costs at 1 percent since September 2010, the longest unchanged period since the 1950s.
“First, the economy needs to grow above its so-called potential rate of growth, so it needs to grow more than 2 percentage points,” Carney said in an interview on Global’s “The West Block.” “Secondly, you need to see a continuation of what is becoming a positive evolution of household debt and aspects of the housing market.”
The central bank would also need to see “inflation picking up a little bit before we would move,” Carney said.
“The next move will likely be a move up in Canada after we start to establish those conditions for sustainable growth,” Carney said, according to a transcript of the interview provided by Global.
The interview was recorded after the bank published its Monetary Policy Report, where Carney retained his bias to tighten policy and reduced his growth forecast for this year to 1.5 percent from 2 percent.
The policy report is Carney’s last before he leaves the bank June 1 to take over the Bank of England a month later. Carney said the importance of the governor’s role at the British central bank “gets overplayed.”
“The core decisions of the Bank of England are made by the monetary policy committee for monetary policy, financial policy committee for macro-credential issues,” Carney said. “The institution is powerful, much more powerful than the individual.”
Asked about Europe’s fiscal crisis, Carney said policy makers “have to do a lot on the structural side in reforming the financial system and fixing their finances and fixing their banks over a number of years.”
Carney said he was “realistically optimistic that they recognize the scale of the problem,” adding that European authorities “certainly have the political will to address that.”