EDMONTON, Alberta — Canada, with its relatively strong economy and growing inflation concerns, should be cautious about following the American lead on lower interest rates, says the governor of the Bank of Canada.
“The circumstances of the moment are that in Canada we do not need, indeed we have to be cautious about having, a monetary policy that is quite as easy as that which the Federal Reserve is pursuing,” David Dodge told the Edmonton Chamber of Commerce on Tuesday.
The U.S. Federal Reserve is scheduled to adjust its interest rates Wednesday and is widely anticipated to lower them by as much as half a percentage point. The Fed has already cut its trend-setting rate by 2.5 percentage points during the current economic slowdown.
But the Bank of Canada, which has cut its rate by only 1.25 percentage points, does not’t have the same need to stimulate its economy, Dodge said.
The Bank of Canada is scheduled to set its next interest rate on July 17.
The governor of the central bank continued to predict growth could reach as high as three per cent this year as the economy begins to pull out of the slowdown spilling over from the United States.
But inflation — which rose to 3.9 per cent in May due to high crude oil and natural gas costs — is a serious concern that the bank must be vigilant against, Dodge said.
