Bank of Canada Governor Stephen Poloz hinted over the weekend that a future interest rate increase is likely, even as he said disruption caused by digital technologies is making it more difficult to gather and analyze economic data.
Governor Poloz was speaking over the weekend at a meeting of world central bankers held in Jackson Hole, Wyoming. In a speech entitled “The Fourth Industrial Revolution and Central Banking,” he hinted that an additional interest rate increase is coming.
As Canada’s central bank has said repeatedly, it is doing its best to base interest rate decisions on the data it collects each month. The goal has been to raise rates gradually, when the data indicates it's a must. But Governor Poloz noted that it can be difficult to “play it safe” in a fast-changing world without risking falling behind.
“Importantly, this approach does not mean keeping interest rates unchanged until inflation pressures emerge,” he said during a presentation at the Kansas City Economic Policy Symposium. “That would virtually guarantee falling behind the inflation curve.”
The Bank of Canada aims to keep inflation in Canada at 2% on an annualized basis.
Governor Poloz singled out during his presentation what he called “digital disruption,” saying that it is making data harder to read, and added that new technologies are leading to what he called “augmented uncertainty,” which may mean that the Bank of Canada will lift interest rates even though it doesn't necessarily have to.
And with Canadian inflation currently at 3%, it would seem that interest rates are more likely to rise again before they come down.
