Market News—Tiff Macklem, the Governor of the Bank of Canada, has stated that the current inflation rate is too high. However, he also noted that there are clear indications that aggressive interest rate hikes are starting to decrease demand.
Policymakers are worried that they aren’t observing a downward trend in core inflation measures. Macklem emphasized that their main focus is understanding how a slowing economy will impact future inflation.
Inflation on the Rise Macklem Warns of Future Concerns
Macklem explained, “Our concern isn’t just about the current state of inflation, but where it’s headed.” He reiterated that they closely monitor factors such as excess demand, inflation expectations, wages, and corporate pricing.
Macklem stated from Marrakech, Morocco, where the International Monetary Fund and World Bank meetings are being held, “Inflation is still too high and widespread.”
Canada’s economy shrank in the second quarter. Households burdened with debt are feeling the effects of a sharp rise in borrowing costs. Macklem pointed out clear signs that monetary policy effectively balances demand and supply.
Due to further evidence of a weakening economy, Macklem and his governing council decided to keep the overnight rate steady at five percent during their September meeting. However, they haven’t ruled out the possibility of further tightening measures to quell any expectations for rate cuts. The central bank’s next rate decision will be made on Oct. 25.