Increased Savings May Indicate Consumer Cautiousness, Say Bank Of Canada Minutes

Canadians' savings were higher than expected, which could be an indication of greater cautiousness among consumers, according to the Bank of Canada's minutes from a recent meeting that was released Wednesday.

While a higher savings rate is a result of stronger income growth, it could also reflect reduced spending for households that are anticipating higher debt repayments when they renew mortgages, it said.

Labor market pressures had eased and it was evolving largely as expected, but job creation has been slower than growth in the working-age population, according to the members of the Bank of Canada's Governing Council.

Members also spent a considerable time in the June 5 meeting discussing recent inflation data when the Bank of Canada reduced the policy rate by 25 basis points -- its first rate cut in more than four years.

Consumer inflation in Canada eased from 3.4% in December to 2.7% in April, and the central bank's preferred measures of core inflation came down from around 3.5% to about 2.75% in April.

"Further easing was considered likely given that three- and six-month measures of core inflation had been running lower than year-over-year rates," said a summary of Governing Council deliberations.

"Members agreed that the recent evolution of core inflation—with both preferred measures below 3% after easing for four straight months—had increased their confidence that progress toward the 2% target would continue," it added.

While some members were more focused on downside risks to inflation originating from a weak economy and restrictive monetary policy, others emphasized the upside risks related to wage growth and the potential of a rebound in the housing market, according to the deliberations. -