These include the effects of uncertainty related to trade negotiations, the expected effects of recent adjustments to mortgage lending policies, and the greater sensitivity of the economy to interest rates given high household indebtedness. In this context, raising the policy rate too quickly would risk stalling the expansion, and cause inflation to fall back below target.
At the same time, raising the policy rate too slowly would risk a buildup of inflation pressures. Governing Council will therefore remain cautious in considering future policy adjustments, guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.