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Bank Of Canada · Inflation · Interest Rates · Monetary Policy
Bank of Canada Governor Tiff Macklem stated that more interest rate increases are necessary to combat persistent inflation, maintaining a hawkish monetary policy stance despite a slowing economy and initial signs of receding inflation.
Macklem, speaking to the Halifax Chamber of Commerce, emphasized that the Canadian economy remains in "excess demand," characterized by low unemployment, labor shortages, and rising wages, which fuels domestic inflationary pressures. The BoC has already raised its benchmark policy rate five times since March, reaching 3.25 percent from 0.25 percent.
Private-sector forecasters anticipate the rate will climb to 4 percent or higher. Andrew Kelvin, TD Bank's chief Canada strategist, expects a 50 basis point hike at the October 26 announcement.
Macklem highlighted the depreciation of the Canadian dollar against the U.S. dollar as an additional factor pushing up import prices, requiring more aggressive rate action. The bank will monitor "core" inflation metrics and inflation expectations from consumer and business surveys, due October 17, to guide future decisions.
Macklem acknowledged the increasing risk of a recession in early 2023, a view shared by a growing number of economists, but reiterated the BoC's unwavering commitment to its 2 percent inflation target.
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