The Bank of Canada’s recent hawkishness doesn’t fit with the weaker core inflation data. Amid further warnings from the BIS about the dangers of sticking too closely to inflation targets when asset bubbles are forming, the Bank might be stealthily heeding that advice by shifting the policy dial to financial stability risks. But with the fully formed housing bubble already in the process of bursting, we aren’t convinced by that explanation and still expect the Bank to keep rates low this year.
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