OTTAWA (Reuters) - The Bank of Canada held interest rates steady on Wednesday, as expected, but said more hikes will be needed over time amid progress on the dynamics of wage growth and inflation, two issues that had previously concerned the central bank.
In altering its long-repeated notes of caution on price and wage pressures, the bank sounded a more hawkish tone on the future of interest rates, which have been increased three times since last July.
“Some progress has been made on the key issues being watched closely by the Governing Council, particularly the dynamics of inflation and wage growth,” the bank said in a statement.
“This progress reinforces Governing Council’s view that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target.”
Still, the bank reiterated that policymakers “will remain cautious” with respect to future rate moves, guided by incoming data as it monitors the economy’s sensitivity to rate hikes and the evolution of economic capacity. It revised up its gauge of potential output growth, which gives the economy more room to grow without inflation pressures creeping up.
Reporting by Andrea Hopkins and Leah Schnurr
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