“We have to realize that this is an asymmetrical game, namely a situation in which the Bank of Canada is getting mixed signals from the economy,” he explained. “Some signals suggest that the economy is strong, some suggest that the economy is reacting to higher interest rates and slowing down, especially the housing market.

“At the same time, they put much more weight on the positive numbers as opposed to the negative numbers because if they have to make a mistake, they’re going to make the mistake of overshooting as opposed to undershooting.”

Overshooting can be corrected by swiftly lowering interest rates, he added, while undershooting is more difficult to correct because it means tackling inflation – which, as shown over the past year, has proven easier said than done.

How is the Bank of Canada assessing economic trends at present?

The Bank said on Wednesday that it expected consumer spending to slow in the face of its spate of rate hikes over the past 16 months, but also highlighted “more persistent excess demand” in the economy displayed by retail trade and other data.

The central bank’s governing council “remains concerned that progress towards the 2% [inflation] target could stall, jeopardizing the return to price stability,” it said.