Bank of Canada: There are times when increasing rates is necessary despite a sluggish economy

Bank of Canada: Interest Rate Increases May Be Necessary Despite Economic Weakness

The Bank of Canada has highlighted that, in certain situations, raising interest rates is required even when the economy is underperforming. Deputy Governor Sharon Kozicki explained that significant shifts—such as growing protectionism in U.S. trade, ongoing tensions in Canada’s trade relations with the United States, and rapid advancements in artificial intelligence—are structural changes that could trigger supply disruptions.

“It might seem unexpected or even illogical to some that monetary policy sometimes calls for tightening during periods of economic weakness. Nevertheless, this is the challenging balance we occasionally must strike,” Kozicki remarked during her address.